SGX profit ticks up to $76m in 2QFY12

Brightening outlook for capital markets.

SGX announced that it has recorded revenue of $162 million (up from $148 million in 2QFY12), net profit of $76 million ($65 million) and earnings per share (EPS) of 7.1 cents (6.1 cents). The Board of Directors has declared an interim dividend of 4.0 cents (4.0 cents) per share, payable on 6 February 2013.

Mr Magnus Bocker, SGX CEO, said, “We are pleased to report a net profit of $76 million. Our Securities market continued to hold up from the first quarter and daily traded value increased 8% year-on-year. Our Derivatives market achieved a record quarter with daily average traded volume of 358,532 contracts, following record volumes in our China A50 futures and Japan Nikkei 225 options. Open Interest on our Derivatives market hit a new high, reflecting SGX’s attractiveness as a centre for risk management.”

Here's more from SGX:

Business Highlights

Securities: Securities daily average traded value (SDAV) for the quarter was $1.2 billion, up 8% year-on-year ($1.1 billion) and down 9% quarter-on-quarter ($1.3 billion).

Derivatives: Derivatives daily average volume (DDAV) for the quarter was a record 358,532 contracts, up 30% from a year ago (274,757 contracts), and 17% from the previous quarter (306,811 contracts). Several other records were also set this quarter, including monthly DDAV of 402,920 contracts in December and single-day Open Interest of 2.95 million contracts on 13 December.

Issuer Services: We had 8 new Initial Public Offers (IPO) (9) this quarter, raising $798.9 million ($214.7 million). Secondary fund raising totalled $1.3 billion ($2.2 billion). Total stock market capitalisation increased 20% to $934.5 billion as of 31 December 2012. Our Bond market raised $39.7 billion ($18.8 billion) through 90 (45) new bonds.

Market Development, Risk Management & Regulations. New international regulatory and risk management standards have been set by the International Organisation of Securities Commissions (IOSCO) and Committee on Payment and Settlement Systems (CPSS). SGX will be among the earliest exchanges and clearing houses globally to meet these standards. By doing so, we assure our customers that they can continue to expand their businesses and manage their risks via SGX.

SGX has deployed adequate capital into our two clearing houses, namely Central Depository (CDP) and Singapore Exchange Derivatives Clearing (SGX-DC) to meet all obligations as Central Counterparties (CCP). As a group, SGX has ample capital and a strong debt-free balance sheet.

Amid other international regulatory changes impacting our customers in the US and Europe, we are taking steps to maintain continuity in our global Derivatives activities. We are seeking formal recognition from the US Commodity Futures Trading Commission (CFTC) for both our derivatives exchange (SGX-DT) and clearing house (SGX-DC). We will similarly be seeking recognition from the European Securities and Markets Authority (ESMA) in the second half of FY2013.

SGX-DC’s application to be registered as a Derivatives Clearing Organisation (DCO) in the US is in progress. In the meantime, CFTC has granted us specific no-action relief to enable US customers to continue their current over-the-counter (OTC) clearing activities via SGX-DC till such time when the registration is complete.

Separately, the Basel Committee on Banking Supervision has published a new framework, as part of Basel III, which requires banks to maintain capital for their exposures to CCPs. Based on this framework, banks clearing through a Qualifying CCP will benefit from lower capital requirements. Since 14 January 2013, SGX-DC has become a Qualifying CCP, enabling our CDP and SGX-DC members to benefit from these reduced capital requirements.

Outlook. This past quarter, we have seen improved sentiments across capital markets globally leading to increased volumes. We are well positioned to benefit if these sentiments continue. Our IPO and bond listings pipelines remain healthy. We will continue to invest our resources in developing new products and services, and strengthening our regulatory and risk management capabilities. Expenses for FY2013 are expected to be between $295 million and $305 million. Capital expenditure is expected to be between $30 million and $35 million.