SGX is not an ugly duckling despite rejection by Swan:Phillip Securities

Efforts at organic growh are showing as trading volume for both securities and derivatives recover.

According to Phillip Securities Research, the proposed merger is rejected on the grounds that the claimed benefits of the deal are likely overstated.

Furthermore, the lack of full regulatory sovereignty over the merged entity would present material risks and supervisory issues impacting the effective regulation of ASX's operations, specifically the clearing and settlement functions.

Options for organic growth
Inorganic growth is called off for now but focus on organic growth is still on. Quarterly revenue has resumed its growth and in recent months, derivatives volume has also shot up amidst the increased volatility in the global markets. Securities daily average which dipped in March had also picked up in April as recovery in the stock market was boosted by fresh spate of buying activities.

By first attracting the big companies, SGX can then move to attract global investors. With global investors, there is greater liquidity which attracts more international brokerages and in turn, exert downward pressure on trading costs. Succumbing to the global rend of commission compressions, cheaper trades begets greater trading interest which could lift SGX trading volume higher. This, Phillip Securities believes is one positive future investors can look towards to.

Failing which, SGX may lose its competitive edge and be subsumed by bigger competitors. Perhaps a Western exchange which can use SGX as a conduit to the East. Becoming an acquisition target however also adds a positive twist to SGX supposed woeful outlook.

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