Singapore Exchange Ltd

SGX:S68

Earnings Call Transcript 2019-Q2

[Lay Chew Chng, executive]

Hi, good evening, everyone here and to those on the webcast. Thank you again for taking time to attend our second quarter fiscal year 2019 results briefing. As usual, I'll start off with a presentation on the financial performance. And then Boon Chye, our CEO, will provide a business update.

Let me begin with our financial results. You would have seen, and I'm happy to report, that SGX delivered a strong set of results for the second quarter. Our top line revenue increased by 9% to $224 million and our net profit was up also 9% from the same quarter a year ago, standing at $97 million.

The past quarter, I think all of us know, saw escalating trade tensions. There was concerns about U.S. interest rates, rising rates and also concerns of a potential slowing of the global economy. So all of this contributed to higher volatility as well and we also saw a global equity selloff.

So against this backdrop and the need of market participants to manage their risk, our Derivatives business performed really well. We achieved 2 records during the quarter: one, a second consecutive quarter of record revenue; and a record trading volume of 60 million contracts that you can see on the slide. The weaker investor sentiment from the equity selloff led to a 13% decline in our securities traded value. This was in line with the performance that we have observed of our regional counterparts.

Expenses increased 8% year-on-year to $111 million, mainly from higher staff cost and professional fees incurred for corporate initiatives. Earnings per share was $0.09 for the quarter. And the Board of Directors has declared an interim dividend of $0.075. And this is an increase of $0.025 from a year ago.

This slide shows the quarterly trend for revenue, expenses, operating profit and net profit. As the chart shows, revenue, operating profit and net profit all show positive trends. Compared to the first quarter, revenue increased by 7%. Derivatives revenue grew by $15 million while revenues from Equities and Fixed Income and Market Data and Connectivity were comparable. Expenses rose 8% quarter-on-quarter from a seasonally lower first quarter, which also included some write-back of costs. The increase was mainly from higher staff costs and professional fees to support corporate initiatives.

This slide here shows the half yearly trend for revenue, expenses operating profit and net profit over the past 3 half years. Revenue for our first half increased 6% from that a year ago. And expenses increased by a similar 6%. So we managed to achieve a flat jaw for the first half of the year. Operating profit and net profit also shows upward trends as you can see from the slide, reflecting the successful efforts in growing our business while exercising cost discipline. Our net profit increased 5% year-on-year for the first half and was up 2% compared to the previous half.

This waterfall chart shows our quarterly revenue movement year-on-year. Boon Chye will be reviewing each of our 3 main businesses later on. As mentioned earlier, our top line revenue was up 9% to $224 million. Our Derivatives business achieved record revenue of $113 million, up $30 million or 35% from a year ago. It now accounts for 50% of our total revenues compared to 41% a year ago.

The results were driven by the following. First, total traded volumes of derivative contracts rose significantly to 60 million contracts. That's a 23% increase. And the blended average fee per contract was comparable at $1.06. Collateral management, license membership and other revenues also increased on a year-over-year basis. This was mainly due to higher collateral management income, which is largely a result of the success of our Derivative business in terms of being able to garner higher open interest and margin balances, reflecting the increased demand for our risk management solutions.

Our Equities and Fixed Income business earned revenues of $86 million, a decline of $12 million or 12% compared to a year ago. And the business accounts for 38% of our total revenues. Securities Trading and Clearing revenue declined by 13% to $45 million. This reflects a 14% decrease in our SDAV to just slightly above -- just slightly below $1 billion. The global equity selloff, as I mentioned earlier, has reduced securities market turnover in Singapore as well as the regional markets. Average clearing fee declined slightly from 2.75 to 2.67 basis points due to increased trading from market makers and a higher proportion of lower-yielding structured borrowings and Daily Leverage Certificates.

Post Trade Service revenues declined $4 million to $21 million. This is mainly due to a few things. The first is declines in the subsequent settlement activities, which reflects the decline in our turnover volumes, as well as a downward repricing of our DVP, or delivery versus payment guarantee fee, from April of last year. This was something that we had telegraphed in the past 2 quarters. Our Market Data and Connectivity business, which accounts for 12% of our total revenues, continued to show steady growth from its colocation business and registered a 6% year-over-year growth to $26 million.

This next slide shows the movement on our expenses. Our expenses, as mentioned earlier, increased by 8%. In terms of staff cost, staff cost increased 7% to $47 million. This was mainly due to 2 things. One is the annual salary increment. We are a 30 June year-end, so our salary increment was sometime in August. Provisions for variable staff cost has also increased, reflecting the better profitability that we have been able to achieve.

The average headcount increased by 30 to 817. So that's our headcount globally for SGX. And we saw increases across the frontline business as well as support units as we built up our business. The pace of hiring, we have sort of kept it quite measured. I mean, we have been very careful in terms of just adding on the headcount and being selective in our hiring process.

Technology expenses remained unchanged year-on-year at $32 million. Depreciation, systems maintenance, rental expenses were really comparable against last year. However, these are expected to increase in the second half. I think we have had the benefit of having some of our old systems coming to end of life, so saving on the depreciation expense.

However, we have implemented new systems, such as our successful implementation of the new PTS system in early December. So that will come onstream in the second half with the associated depreciation expense. We're also intending to spend a bit of money in terms of improving our technology resilience as well as our info security in cyber defense. Professional fees increased by $4 million. And that's mainly because of higher consultancy and legal fees to support corporate initiatives.

This next slide shows the first half year revenue. It's up 6%, as I mentioned earlier. So here, just very quickly, our Derivatives business recorded a 29% higher revenue as total traded volumes rose 20%. And Derivatives for the half year accounted for 49% of our total revenues. For our Equities and Fixed Income, revenues of $172 million, down against a year ago and the business was 40% of our total revenues. Post Trade Services revenue, you can see, declined by $10 million for reasons similar to what I had mentioned earlier. And our Market Data and Connectivity business registered a 4% year-on-year growth in the first half.

This next slide is on the first half expenses, up 6% against the same period a year ago. And essentially, the reasons for the increases are similar to what I had described earlier for the second quarter. So I won't go into further detail.

This is my last slide on our key performance indicators. And you can see our operating profit margin and our ROE remains high, 51% for our operating profit margin and 39% for our return on equity. And as I mentioned earlier, the Board of Directors has declared an interim dividend of $0.075 per share. This is an increase from $0.025 from a year ago.

So with that, I thank you, and I'll pass the floor to Boon Chye, who will now present the business update.

[Boon Chye Loh, executive]

Good afternoon, good evening, everyone. Let me start out with the segmental breakdown of the 3 business lines for the second quarter FY '19. It's a quarter where we continue our strong overall performance, starting on with the first quarter last year.

You heard from Chng, the Derivatives revenue reached another quarterly high, 35% increase year-over-year, to reach $113 million. EFI, revenues saw a 12% decline in revenue as issuers and investors stayed on the sidelines amidst market uncertainty. Our steady Market Data and Connectivity business grew 6% due to an increased demand for colocation services. Our strategic priorities of building a multi-asset exchange and growing our international presence has led to an overall increase in revenue with Derivatives and Market Data and Connectivity more than compensating the decline in the Equities and Fixed Income segment.

In the Derivatives business. Trading activity from clients in the non-Asian hours increased, the T+1 session. The number of T+1 trades has also increased and is now also a higher proportion of the total trades. We continue to reinforce our position as the leading market infrastructure in Asia, receiving an award this quarter, that brings to 4 awards -- adding to the 4 awards that we received last quarter. We were awarded the Asia Exchange of the Year at the Energy Risk Asia Awards in 2018, recognizing our excellence across the Asian commodities market. And this is the third year that SGX has been given this title.

Let me now give you the context of the performance for each of the business lines, starting off with Derivatives. Derivatives trading and clearing revenue of $71 million represents an increase of 23% year-over-year, driven by increased trading volumes to 60 million contracts in the second quarter. The volume increase is 23% year-over-year. But in particular, we saw increased volumes in equity derivatives and FX futures.

The equity index to this volume was up 21% year-over-year to now 50 million contracts. We saw record FX volumes to 5.1 million contracts. And that's up 61% year-over-year. Commodities volumes also turned in a strong performance at 4.6 million contracts. And that's up 24% quarter-on-quarter. The increased volume reflects the value of our suite of risk management solutions to our clients -- for our clients in the current market environment while we are continuing to build on this with new products and enabled us to better serve their needs.

One of the products that we spoke quite a bit over the last few quarters has now gained greater adoption is the MSCI Net Total Return product suite. I'll elaborate later on. But the average open interest was up 10% year-over-year with increased trading activity and real interest in this particular product suite that has also led to higher collateral balances.

In just the equity segment, equity derivatives contract volume was 50 million contracts, driven by A50 futures reflecting the importance of China market in the global economy. China, as you know, is the largest country in the MSCI EM Asia index. The weightage is 41%. And with inclusion, that is likely to grow. The product suite for today's access into EM Asia and Asia covering the major economies of Japan, China, India as well as ASEAN. In addition to the futures contract on the benchmark indices, we have also been extending our product suite to attract other market participants, particularly in the NTR suite.

The open notional in terms of open interest in the NTR product suite stands at USD 23 billion. That's a growth of 10% year-over-year. This really reflects the deepening sophistication of the Asian capital markets and the need for round-the-clock risk management to service this previously OTC equity derivatives marketplace. And in fact, in the equity capital markets, Asia is expected to account for over 50% of growth in the next 10 years and will become the largest equity market region with a market cap of greater than USD 50 trillion.

And factors leading to the strong growth include assets being benchmarked through MSCI has grown over time. Assets in the passive equity funds has also grown over time, now close to 50% of the total U.S. passive fund AUM invested in Asia has grown from below 20% a year ago to a much higher number. And clients appreciate the balance sheet and efficiency of booking this Asian exposure on a single trusted clearing platform, where SGX remain the best-in-class among clearinghouses with a high contribution to the clearing fund.

Now the FX and commodities segment within Derivatives. Our record FX futures volume, volumes grew 61% year-over-year. Demand for these products remain high as we are now clearly living in a geopolitical tension world and with many macro developments ongoing. In particular, our key FX futures contract has been a very, very valuable risk management tool for clients outside of Asia as evident from an increase -- our significant increase in the T+1 volumes. To further anchor our FX franchise, there are ongoing efforts to drive adoption of [ FXC ] or rather FlexC FX futures, which is a clearing product. This will allow users to send bilateral OTC trades with bespoke settlement dates for clearing.

The other key contract that we have is really iron ore in the commodities segment. That grew to 3.9 million contracts for the quarter. We have also supplemented that business with the launch of the first high-grade 65% iron ore contract. This complements obviously the benchmark 62% contract that we have. And we're indeed the first exchange to offer a spectrum of iron ore products from the 62% to a high-grade 65% and also iron ore lump and more to come in this space in the months ahead.

We'll continue to drive adoption of our Titan OTC trading platform. This, to remind you, was launched in August of 2018. And to recap, the platform provides interdealer brokers with workflow, trading and clearing solutions. Products on the platform currently are thermal coal, rubber and petrochems. And over the course of this year, we'll be launching more asset classes, including coking coal and our benchmark iron ore contract on this platform.

Now in the Equities and Fixed Income segments, starting off with Issuer Services. In the listing space, there were 3 listing compared to 7 a year ago, broadly in line with markets globally for IPO that saw a decline in the last quarter. We had some companies which decided to defer their IPO decisions, waiting for better market environment, which obviously we did see a little bit of reversal in terms of more positive market tone just in the last 3 weeks of the new year. Pipeline remains healthy with insurance from local and international companies across these sectors of real estate, health care, mineral, oil and gas and the technology sector.

In fixed income listing, a total of 296 bond listing raised SGD 122 billion. That's compared to 289 listings a year ago and just over SGD 100 billion of funds raised a year ago. And that now brings the total on the exchange to over 3,500 securities in bonds. We remain the leading exchange in Asia for listing of international bonds. In fact, 80% of listed bonds come from offshore issuers and close to a 40% market share for listed G3 Asia-Pacific bonds. And now we have issuers from almost 50 countries. And we'll continue our marketing efforts to attract more issuers who wish to tap the Asian liquidity.

In Securities Trading and Clearing, market actively declined year-over-year with traded value decreasing by 14% to just under SGD 1 billion. Clearly, the uncertain market environment impacted investor sentiments, particularly in the region. Market activity, however, for the other products was up year-over-year. And in the quarter, we continued to expand our suite of Daily Leverage Certificates, DLC.

We introduced 10 single stock DLC at the end of last year. Such structured products boost the vibrancy of the market by offering participants other avenues to gain exposure to key Asian indices and large-cap stocks. The single stock DLC comprises currently 6 large Singapore companies and 4 Hang Seng Index stocks. Our DLC has gathered trading interest in the last 2 months. This single stock DLC has gathered interest since launch, led by companies in the technology space. And we've also seen a substantive increase in new participants.

And together with MAS and the industry, we'll be supporting and expanding research coverage through the MAS grant for equity market fund, GEMS, G-E-M-S, Grant for Equity Market Singapore. This will benefit the mid- and small-cap stocks, which has received limited coverage but may have a good growth story. And in time to come, we'll bring more GEMS to the attention of investors.

Our securities settlement revenue decreased $3 million year-over-year in line with the decline in market activity. And we also revised pricing downwards for the DVP guarantee in April of 2018. We look forward to the possibilities that the new post trade, which was launched on the 3rd of December, what it will bring for the market and take this opportunity to thank all the brokers, securities firms who are instrumental to the successful launch of the system. It was really a big cutover that the whole industry undertook on the weekend.

And what you see on the screen here are the interfaces that our brokers can use. Since the launch of this post trade, members can now use their own back-office systems to connect to our depository CDP. There is now real-time exchange of information for 3 allocation and settlement instructions, which enable our members to operate more efficiently. And the new post trade system provides the foundation for us going forward to have efficient and seamless delivery of digital services with full-day availability. And we'll be able to expand into SDAV independent services and the expansion into other new areas that will allow investors to better utilize the asset that our same cap with CDP for additional returns. And such services will include SBL, securities, borrowing and lending; FX conversion services and some other market data services.

So in the last business segment, Market Data and Connectivity. Revenue grew 6% year-over-year, driven by growth of 9% year-over-year in the connectivity business. That's attributed to growth in the access API for participants connecting into our Derivatives market and also colocating at the data center. With the increase in the trading activity that we saw in the Derivatives market, existing clients have also subscribed for more colocation services. And we also had new clients over the past year.

And in the index space, we became the first exchange to distribute the CFETS-Bank of China Traded Bond Index outside of China, when we announced that in November of last year. We have also entered a strategic cooperation agreement on the CFETS-BOC bond indices with the Bank of China Limited and the China Foreign Exchange Trade System, known as CFETS, and also the National Interbank Funding Center.

Let me talk about how we see the environment looking forward. I think markets could continue to navigate for direction and with mixed macro views on the direction of where markets will hit. There are a few events coming up in the next quarter that will likely shape the market environment for the rest of the year. And the foremost of that is the outcome of the U.S.-China trade talks and the direction of interest rates. As such, we expect continued demand for our risk management and hedging solutions and services. And in the securities market, we're seeing issuers and investors adopting a cautious approach while remaining very ready for opportunities either to push ahead with fundraising or make investment decisions.

And we are on track to deliver our strategic priorities and well-positioned to meet the customer needs. We'll continue to build on our multi-asset strategy by developing new products and services to meet clients' needs. And this will be supported by our international presence which distributes our risk management solutions globally. And as guided previously, we aim to keep OpEx within the $445 million to $455 million range and technology CapEx between SGD 60 million to SGD 65 million.

Let me also conclude by highlighting some of our achievements in the last half year. So one, we talked a lot about building a multi-asset exchange. I've shared the growing success of some of our products, in particularly the MSCI Net Total Return product suite. Our foreign exchange franchise is also coming along nicely, and we are committed to building on it.

We have also consolidated our leading position in iron ore. And the launch of the Titan OTC Pro platform is now able to even serve the OTC clients better. In the securities market, the DLC products presented an opportunity to expand the geographical focus of our market and attract international liquidity on large-cap stocks listed in Asia and the new Post Trade Services have been made possible with the launch of the post trade system.

Two, growing our international presence. We have opened offices in New York and San Francisco in the last quarter and look forward to attracting more international participants to our markets as these offices step up coverage and marketing activity.

Third, on widening partnerships and networks. Our strategic investments augment our core products and services and allow us to tap into new distribution channels. We've also launched new digital channels to deliver better services to our customers and also services for investors and apply our very first patent from our proof of concept on delivery versus payment blockchain solutions in partnership with the industry. So clearly, a fruitful half year and one step closer towards realizing our strategic priorities.

That concludes my presentation. I invite my colleagues to join me for the Q&A session. Thank you.

[Boon Chye Loh, executive]

Any questions? Yes, Nick?

[Nicholas Lord, analyst]

So I guess, congratulations on a very good Derivatives outcome and clearly a strong revenue outlook or outcome. I wonder if you can just help us a little bit on the Derivatives. Because I know a lot of it is driven by market conditions. But obviously, there's a lot of things going on underneath as well, which is driving, I guess, some structural growth. Can you -- I mean, I don't know if there's a slide you can use there. But can you help us think a little bit about how that splits so that we can sort of get a sense for what the structural growth is versus what the cyclical growth is about Derivatives and, I guess, some sense for sustainability of those revenues?

[Boon Chye Loh, executive]

Yes, there's indeed some market volatility. But the way we look at the Derivatives business are in the following manner. One, clearly a global access point for participants into the Asian market. And in there, there's also been growth of indexing or passive investing in passive funds. And our ability to try and create further relevant products -- and I mentioned over the last few quarters in terms of the Net Total Return product suite that really allows us to capture and help investors who are accessing Asia with a simpler but yet efficient way to gain exposure in Asia. So that has clearly helped. And if you see the numbers, not just in the volumes, we had a 10% increase in open interest. So some of these products are clearly largely OTC. But because they can now send it for clearing to the exchanges, clearly very efficient. And adding to that, which the -- 2 years ago, when we first started to talk about FX, that's now coming quite nicely. And again, that adds to the ability for any participant to trade all of Asia with the ability to choose asset classes and yet to hedge the exposure back into dollars with our FX contracts. So I'll say, it's a good trend in terms of how we've been able to anchor more sticky participation. Yes, there will be volatility around it. But I think we now have a good base to build on that. Dominic, any questions from the...

[Dominic Lim, executive]

Yes, just one question just came in. Following the launch of the new post trade system, how often will SGX maintain it in terms of updates? And so also what new capabilities will you be expecting going forward?

[Lay Chew Chng, executive]

Yes. So as following the launch of the post trade system, we have been able to gradually introduce new services, starting with broker-linked balances. We had also planned, as we have described earlier, a suite of services for investors, including conversion of the dividends and the FX. So these will be introduced gradually to the market. And we certainly would hope the adoption rates by the brokers as well as the intermediaries and the end users will actually be forthcoming. So we have -- in terms of the first question with regards to maintenance, it has been a very long cycle time before we had, together with the entire industry, migrated to a new post trade system in December. We certainly don't expect any immediate refresh of this.

[Boon Chye Loh, executive]

But related to that, I will also say the following. I mean, in the last 4 years, we have done major launches of our system, right? We upgraded our Derivatives systems. We launched the post trade. We have developed the fixed income Bond Pro. Now we do that internally. So there's been a series of big projects that we have launched. And one of the questions is always, where do you want to put CapEx in? I think more importantly, while we're continuing to invest, there won't be that many of big projects coming through. We started obviously way before this on our digitalization journey. But what you'll see is an acceleration of that. And in that, whether that's post trade, by being able to work with the industry to make it even more efficient and seamless online, get the access to easily is where we will be accelerating those efforts. And that's where some of those CapEx will go to. But I mean, obviously we'll guide the CapEx as we enter the next financial year. But I think you will see a shift from us in terms of large project system launches to really making the investing journey coming to SGX, working with whole ecosystem to make investing and fundraising a joy.

[Dominic Lim, executive]

Okay. One more question from -- sorry, so one question from Phillip Capital. Can you shed some light on the FX derivative customers, particularly those who have been migrating from the OTC to exchange-traded products? And why are they doing so?

[Boon Chye Loh, executive]

Ramu?

[Muthukrishnan Ramaswami, executive]

The traction that we've seen in FX, we have many FX peers, actually has largely been in rupee and in offshore RMB, which is CNH. The customer groups on each one of these contracts are subtly different. There are sorts of people who trade rupee, are also likely to trade Indian contracts, MSCI, Nifty. The sorts of people who trade RMB tend to be commodities-type clients. So what's been very pleasing as we track the growth of this is the increase in numbers of end clients. While right now, the amount of trade per end client is small, it's very pleasing. These are real end clients with really hedging needs. So I think there's a long way to go. FX is a huge market. While these volumes may look large, I guess, in the historical Derivatives context, if you compare them to the volumes that you see in OTC, this is still very early days.

[Boon Chye Loh, executive]

And I'll also add to that, that in the FX asset class, we obviously we're able to gain better traction in the FX suite because of our other equity and related asset classes. So that really got us going. But this in our view now is of a significant liquidity, significant volume on our exchange that this would now grow even on its own as an asset class. And that's clearly not an overnight effort. It's clearly an effort by the whole team over the last few years and is very pleasing to see the volumes and the results coming through. Yes?

[Jeffrey Tan]

Jeffrey from The Edge. I have 2 questions. On the Derivatives business, the growth seems to be quite huge. Do you think this is one-off? Or how sustainable is this growth going forward? My second question is on the Equities and Fixed Income business. The drop seems to be big as well. So what is your outlook going forward for this business?

[Boon Chye Loh, executive]

Yes. So I think in the Derivatives business, we have formed and built a strong foundation. Yes, we can't quite extrapolate the huge year-on-year increases. But I think it's a segment now where we've built a good foundation to further grow on that, right? So the results will be where the results are. But I think it's a strong base for us to further grow this business. And in the securities business, I would say the last quarter performance in terms of volume and traded value in the context of the regional market is comparable. What is also more important then is as we look at our equity market itself, 40% of the issuers are from outside of Singapore. So clearly, we are focused on our companies in Singapore, helping them to raise funding but also focus outside of Singapore. And in that, if you look at how we have -- with the issuer, with intermediary to launch DLC, that really allows us to trade large liquid stocks that are not listed here and that would just add to the volume that we have. And I think the quarter that has just passed is one of where we saw very weak sentiment in December in particular.

[Rikin Shah, analyst]

Rikin Shah from Crédit Suisse. My question is also on Derivatives and specifically on iron ore derivatives. The volumes actually rebounded strongly after being subdued for 2 quarters. And this comes at a time when DCE has also opened up its market. So how much of this was cyclical? And how has the market shared in this particular commodity mood if we take into account even the onshore?

[Muthukrishnan Ramaswami, executive]

I would say if you look at the data from the last quarter that the volume trend for our international offshore marketplace was actually quite different from the volume trend on DCE. There is a little bit of benefit for both marketplaces in the internationalization. There always is because there's more cross-trading, there's potentially more arbitrage. But very specifically in that marketplace, there was some very idiosyncratic moves in the trade for iron ore because there was a reach for high-grade iron ore. And a lot of that is indexed either off our new contract, the 65% benchmark, or even off the 62%, whereas a lot of the iron ore that's traded within China tends to be potentially of lower grade, right? The physical delivery in DCE tends to lead to a cheapest to deliver-type mechanism. So what's happened is that as a lot of the steel mills reached for higher-grade iron ore in order to maximize their margins in steel production, we saw much more demand for our product, the international product, because most of the ore that they need had to be imported, had to be secured.

The volatility in this marketplace is to be expected because we have seen maybe a number of quarters where sentiment in general or the tension between marginal supply and marginal demand, that kind of disappeared for a little while. But all of that is coming back. For example, all it takes is a train to derail in Northern Australia. And all of a sudden, you've got supply disappearing. So these are circumstances in which you have no choice but to come in and manage your procurement through Derivatives, right? Because iron ore is a very unusual commodity. It is actually a blend of all sort of powders that you still have to index like a financial. It isn't a lump of gold, it isn't like a lump of coal. So we like the current conditions. And we have, I think, met industry demand by listing new products, which allow you to hedge even basis differences or the differences between powder fines and lump. And lots of little -- iron ore is a multidimensional-type thing. And I think we keep reacting to industry demand for that. And that's what we can do on our platform, which may be very different from the onshore platform.

[Rikin Shah, analyst]

Sorry, just one more follow-up. Have you heard about the direction, just like onshore DCE launching such higher grade of products similar to SGX? And if that happens, how sticky would be the customer base?

[Muthukrishnan Ramaswami, executive]

So part of me thinks it would be great if they did that because then our liquidity would grow as well. I think the physical nature of what they do, delivery into warehouses, into ports, is very different from what we do. For us to launch a new product, we merely need to secure the concurrence of the industry around a benchmark. For a physical exchange to launch a new product is a very considerable amount of work. You need to arrange warehousing. You need to arrange inspection. You need to arrange standards. So while it's entirely possible, we feel that for iron ore in particular, the way we do things is particularly suitable for international trade, which is indexation.

[Boon Chye Loh, executive]

I think what we'll be keen to -- so any one of you, if you are keen, we'll arrange it for you to see a demo on our Titan OTC Pro, right? I mean, I spoke about it. But I think seeing it visually helps. And then as I said, a workflow trading and clearing solution platform. We have started with really cool products and we're going to add iron ore on that. And it's a platform that helps the OTC market, the physical commodity traders and also more importantly our distribution, which is the IDBs, interdealer brokers. So we're happy to organize that. If any one of you get in touch with Dominic, we'll show you a demo of why it will help to entrench the participants further to use our product suite.

[Takashi Nakano]

Takashi from Nikkei. Last week, NUS professor and students published a report in which they called for a review of Catalist board. So how would you respond to that? Is a reform of Catalist necessary?

[Lay Chew Chng, executive]

So I think there are certainly a lot of different views that have been expressed, including the report by the professor. So we are studying that quite carefully. Catalist serves a very important purpose. A lot of the cross-border listings in Singapore comes from the region and has supported many growth companies. So we are certainly studying all feedback in the market. And appropriately, we'll respond to the market accordingly.

[Melissa Cheok]

Melissa from Bloomberg. I'm just following up on Takashi's question, wondering if you can share a little bit about your outlook for listings for the rest of this year. I know you announced a grant earlier this year about -- I think it's GEMS. Just wondering if you could share a little bit about what you expect for this coming year.

[Lay Chew Chng, executive]

The grant that -- GEMS grant is actually being put up by the Monetary Authority of Singapore. So we are very excited that the grant has been made available, not only for primarily listings but specifically also parts of the grant go towards research, which is very important to support the ecosystem in the secondary market, which makes the listing a success. So we've had a number of IPOs in the last quarter as we've seen. It was a little bit weaker as a number of IPOs that were reported in press were delayed. We certainly are quite hopeful with our first yesterday. And the outlook and the mandates are there. Then we certainly hope the macro situation improves and the investors and the issuers will continue to find Singapore a very good market.

[Boon Chye Loh, executive]

But I will add that the listings IPO is very important for us, giving companies ability to access for financing is important, giving investors greater variety of companies to invest is important. The pipeline is good. But as I said in the outlook, I think markets will never get full direction. So there will be, I think, sentiment component that you cannot ignore despite a good pipeline. And that is why in a quarter like this, the ability to build other businesses, diversify, provide different asset classes, I think, is coming through at least in terms of what you saw in the results. And Derivatives drove that. And clearly, if the sentiment is positive, I think you get a second part of listings and equity volume coming through.

[Lay Chew Chng, executive]

And Melissa, if I were to add as well, as part of capital raising, Singapore continues to be a very good market last year. And we expect that to continue not only in the primary but in the secondary market, there were 4x the amount of primary funds raised. And in the fixed income market, it was similarly a stellar year.

[Boon Chye Loh, executive]

Any other questions? Anyone?

[Dominic Lim, executive]

There's a question from Gurpreet from Goldman Sachs. He has 2 questions, actually. The first one is on Derivatives pricing. Derivatives pricing seems to have held up vis-à-vis the last few quarters. Given the current environment, taking into consideration competition, what do you expect this to look like going forward? So that's the first question. And the second question will be -- is on the new PTS system. Will the new PTS system help SGX launch new single stock options?

[Muthukrishnan Ramaswami, executive]

So the pricing that we've seen aggregate across the portfolio, in this past quarter, it's held up very well, I guess, versus some of the previous trends, where with volume expansion, it could have led to more activity by a lower fee class of clients. That did not turn out to be the case last quarter. We in fact saw more activity, more risk transfer by, if you like, the higher-paying customer base. And I think that's reflective of the kind of risk environment that we saw last quarter. Whether this persists, I mean, it's really for the market to dictate. I would say that the -- just looking at the way the various prices moved on the various products that we have, this wasn't just more volatility. There was a genuine range expansion in each individual product that we offer. And therefore, there was a lot more risk transfer by that category of end client. And that's resulted in, I think, the fee per contract results that you saw.

[Boon Chye Loh, executive]

And in the last year, obviously we -- and it's not a quarterly effort. But in the course of the last 12 months and also before that, but last year in particular, we opened up offices in the U.S. And part of that is really to acquire more international participation. And I mentioned some of the T+1 volumes, that has really picked up. So yes, you will have participants who will trade out of Asian time zone and outside of Asian time zones from Asia but also seeing a greater proportion of participants from U.S. and Europe.

[Lay Chew Chng, executive]

And Gurpreet, I think for the second question, in terms of capabilities from our new post trade system, certainly a wider product range can be envisaged. But specifically on single stock options, like any other new product class in the market, it will be a function of the demand as well as ability for the brokers and intermediaries to be able to offer that. So we'll continue to review in excess. In the meantime, we are actually very excited that we have the securitized derivatives products that have continued to grow year-on-year, notwithstanding a tough macro environment. And in particular, a number of these securitized derivatives products are on -- a lot of stock still are outside of Singapore.

[Boon Chye Loh, executive]

Any other question?

[Dominic Lim, executive]

Yes, a couple more. One from Wei-Shen from WatersTechnology. What are the other smaller technology projects that you mentioned? And in this -- is this supposedly making the fundraising process seamless? The second question is what is the status of the arbitration with NSE? And what is the progress on the GIFT city effort?

[Boon Chye Loh, executive]

Yes, so on the first point, I wouldn't get into the exact specific. But think a lot -- think of it as our desire to allow investors who want to invest into the market a more seamless digital way and also for any issuer that are listed on the exchange. Whenever you do any corporate action and services, we just want to make the journey a lot easier. And on the second question, in terms of Nifty India, both exchanges, NSE and SGX, have recently submitted a joint proposal to our respective regulators on a NSE IFSE, International Financial Service Centre, and SGX connect model. And that model took into account feedback from international participants that we sought in a joint consultation.

[Dominic Lim, executive]

One question from Anita Gabriel from The Business Times. Can you provide some updates on your tie-up with the Tel Aviv Stock Exchange? Any imminent new listings from this partnership?

[Lay Chew Chng, executive]

I think we've been very excited to be able to host a number of companies from Israel in Singapore. And there are presently a few of them which have been exploring with the various professionals and the corporate finance houses on possible transactions. But as it's too early for us to make any public announcement, we certainly hope that they will materialize this year.

[Boon Chye Loh, executive]

Okay. No questions. We'd like to thank you for your presence and questions. Thank you very much.