SGX braces for wild revenue swings as derivatives trading volatility escalates

Average traded volume dropped 35% in August.

With its derivatives business under threat from volatile market conditions, the Singapore Exchange could see wide earnings fluctuations in coming quarters.

According to RHB Research, the recent softness of the Chinese equities markets has contributed to the China A50 Index Futures’ trading volume weakness. The A50 Index makes up bulk of SGX's derivatives trading business.

The China A50 Index Futures average daily volume of 403,000 in August was 35% lower MoM, while the August total average daily derivatives trading volume of 814,000 was down 14% MoM.

Despite the volatility, RHB Research believes that the SGX is well-placed to ride out current market volatility.

"Securities market’s average daily turnover (ADT) remains respectable. The amount of SGD1.18bn in securities ADT in the past three months was in line with our SGD1.17bn FY16 assumption; August derivatives volume surged 80% YoY (-14% MoM), but share price has fallen by 7.6% over this timeframe. We believe the negatives have been largely factored in. Being a monopoly with a net cash position offers it resiliency,” said RHB Research.