SGX profits at risk from insufficient trading volumes in derivatives

The surge in China A50 futures and Iron Ore derivatives may taper off.

SGX saw profit growth from a surge in derivative demand, but analysts argue that part of this surge could be short-term.

According to DBS, derivatives revenues soared, driven by growth for China A50 futures and Iron Ore derivatives. However, the surge in the China A50 futures activities may not be sustainable.

DBS adds that derivatives, which is a growing revenue generator, could be at risk if products do not generate sufficient trading volumes. 

Despite a slight revival in trading values, securities revenues declined due to a drop in clearing fees. SGX continues its efforts to enhance the securities market starting with the reduction of the standard board lot size to 100 from 1,000 on 19 January. The minimum price of S$0.20 for a stock will be implemented in Mar 15.

The other initiatives: (1) collateral requirement for securities trading, (2) short position reporting requirements, (3) transparency of trading restrictions, and (4) reinforcing the SGX listings and enforcement framework, will be implemented over the next few quarters.

Other revenues were flattish q-o-q. Higher expenses were related to variable staff costs. A based DPS of 4 Scts was declared.