Singapore Exchange Ltd

SGX:S68

Earnings Call Transcript 2020-Q3

[Boon Chye Loh, executive]

A very good morning, everyone. This is Loh Boon Chye, CEO of the Singapore Exchange. I hope you can hear me clearly. And I also hope the timing of our results briefing suits all of you.

Moving forward, we'll be releasing our results before market open and holding our briefing in the morning, unless our schedules do not permit so.

I also hope all of you are keeping well and staying at home to help break the chain of transmission of COVID-19.

We are indeed living in extraordinary and unprecedented times, and our third quarter results are a reflection of this. Firstly, investors are making their views known in our equity market on how they think the pandemic will play out across different sectors and companies.

This has resulted in a surge in trading activity. Secondly, reliable access to markets previously taken for granted is something that we now have to protect. Demand for our multi-asset investment and risk management solutions has intensified, especially from international participants trading outside of Asian trading hours. Lastly, it is difficult to predict what the post-pandemic world would be like. What is sure is that we are using this time well to continue to grow at the digital organization and to stay connected with everyone. SGX has been proactively managing the COVID-19 situation, taking a holistic approach to maintain a safe working environment and to ensure the resilience of our market. Even with 90% of our staff now working from home, our operations continue uninterrupted. Our priority is to ensure that our markets are always available and accessible so that our clients can manage their investment portfolios during this volatile times.

I will share more on our business updates later, but for now, let me pass the time to Mr. Chng Lay Chew, our CFO, to update you on our financial results. Over to you, Chng.

[Lay Chew Chng, executive]

Thank you, Boon Chye. Good morning to everyone on the webcast. Once again, thank you for taking the time to attend our first virtual results briefing. It's for the third quarter of FY '20. I will be presenting our financial performance for the quarter, after which I'll hand it back to Boon Chye to present an update of our business.

Let me begin with some of our key financial highlights.

SGX delivered growth in all business segments in the third quarter. We achieved a net profit of $138 million, a 38% increase over a year ago. Our top line revenue rose 29% to $296 million, EBITDA increased 39% to $186 million. As Boon Chye stated earlier, this past quarter saw increased demand for our risk management solutions across all our asset classes. Volumes in currency and commodity derivatives increased 39% to 14.9 million contracts, while equity derivatives increased 24% to 61.5 million contracts.

On our cash equities market, total traded value was $101 billion, an increase of 63% against a year ago and 49% against the previous quarter. Total expenses increased 20% to $133 million. Our earnings per share was $0.128 for the quarter, sufficient to cover the quarterly dividend of $0.075.

This next slide shows the quarterly trend for our revenue, total expenses, EBITDA and net profit for the past 5 quarters. You can see that the trend shows positive growing trends. Compared to the previous quarter, revenue grew 28% to $296 million. EBITDA increased 32%, while net profit grew 39%. Our total expenses increased by 19% from the previous quarter because of the increase in the variable costs, such as volume-related royalty expenses, a $5 million SGX care package and costs associated with the acquisition and the consolidation of Scientific Beta.

Next, we show the year-to-date 9-month trend, again, for revenue, total expenses, EBITDA and net profit. As you can see, for the same period over the last 3 years, it has been a positive growing trend. Revenue increased 17% for the year-to-date against a year ago, while total expenses grew 10%, and we achieved a positive jaw ratio of 7%. EBITDA increased by 26%, and net profit was up 22% to $351 million.

This waterfall chart shows our quarterly revenue movement year-on-year. Boon Chye will be reviewing each of our 3 main businesses in more detail later. Firstly, our fixed income, currencies and commodities business recorded a 23% increase in revenue, mainly from currencies and commodities, and it accounted for 15% of our total revenue for this quarter. Currencies and commodities revenue increased 23% to $42 million. Revenue from trading and clearing was higher as commodity futures volumes increased 34% to 7 million contracts, and currency volumes grew strongly by 45% to 8 million contracts. Volatility in underlying commodities and currencies led investors to utilize our contracts to manage their portfolio risk. Treasury and other revenue increased by 11%, mainly from higher treasury income as collateral balances grew year-on-year.

Our equities business, comprising the cash and cash equities and equity derivatives, rose 38% to $111 million. Within the cash equities business, listing and corporate actions was $15 million comparable to a year ago, and there were 5 equity listings that raised about $700 million. Trading and clearing revenue increased strongly by 65% to $68 million. Total traded value grew 63% to $101 billion, as I mentioned earlier. Our average clearing fee increased to 2.71 basis points due to a lower proportion of trades from market makers. And our turnover velocity for the quarter was 57%. Security settlement and depository management revenue was $26 million as the increased market activity resulted in higher volumes of subsequent settlement instructions. Equity derivatives revenue was up 24% to $106 million. Trading and clearing revenue increased 26% as the volumes rose 24% to 62 million contracts. This was mainly due to increased volumes in our Nikkei 225 contracts, in the MSCI Taiwan as well as the Nifty 50 index futures contracts. The treasury and license and other revenue grew $22 million to -- 22% to $41 million from higher treasury income and license fees. The increase in treasury income was due to higher collateral margin balances. Our average blended fee per contract for equity, currency and commodity derivatives was comparable against last year at $1.12 per contract. In terms of our third business line, data connectivity and indices, we recorded a 26% increase in revenues to $33 million, and it accounted for 11% of total revenue. The market data and indices revenue increased by 53% to $17 million, and this was largely due to the consolidation of revenues from Scientific Beta, which we acquired at the end of January. Connectivity revenue increased 7% to $16 million due to higher derivative connectivity subscriptions.

This next slide is on expenses. So our third quarter total expenses was up 20% year-on-year to $133 million. Total expenses was -- the increase in total expenses was due to: one, higher staff costs, which included staff costs of Scientific Beta; two, costs related to the SGX care package; and three, an increase in royalty expenses. So total staff cost increased 22% to $58 million. The fixed staff costs increased by 12% due to the annual salary increment and an increase in headcount, the consolidation of staff costs of Scientific Beta. Three is welfare expenses from the SGX care package. Provisions for variable staff cost increased 42% to $22 million due to higher profitability generated this quarter. Average headcount was 877, an increase of 54, which included 33 staff from Scientific Beta. Technology expenses declined 12% to $17 million. This was mainly due to the adoption of the new accounting standards on leases, which I've explained in previous quarters that went to effect in July 1, 2019. Therefore, rental expenses of $2 million on our data centers that were previously recorded as technology expenses have been reclassified as depreciation expenses. Excluding that, the technology expenses would have been comparable year-on-year. Processing and royalties increased 36%, in line with the higher derivative volumes. Premises declined by $2 million to $3 million, again, due to the adoption of the new accounting standard on leases. Other expenses increased 55% to $12 million, mainly from the SGX care package. And this was a package that we rolled out to fund national health care support programs and to introduce measures to assist listed companies affected by the COVID-19 pandemic. This was partly offset by lower marketing and traveling expenses.

Depreciation and amortization increased 46% to $23 million, again, mainly due to the accounting standard on leases. Excluding that, the depreciation increased because of implementation of new systems and amortization from intangible assets.

This next slide shows the year-to-date revenue, again, compared to the same period a year ago. So it's up 17% to $774 million. The FICC business recorded 32% higher revenue of $130 million, largely due to an increase in volumes. Similar to the quarter's results, there was also an increase in our treasury income. Our equities business generated revenues of $559 million, an increase of 15%. Cash equities increased 17%. Total traded value rose 23% and our average clearing fee was comparable at 2.66 basis points. For equity derivatives, revenue increased 13% to $271 million. The increase was due to higher trading and clearing revenue and higher treasury license and other revenue. Reasons are similar to that for the quarter. Data, connectivity and indices administered a 12% growth to $85 million. Again, the reasons are similar to what I explained for the third quarter, and it was mainly due to the consolidation of revenues for Scientific Beta. We also saw continued growth in our co-location business.

On year-to-date expenses, I will not go into detail here because the reasons for the expense movements are similar to those that I mentioned for the third quarter.

Next slide, please. Lastly, in terms of our key financial indicators. It shows the trend of our -- for the past 5 quarters, our operating profit margin, EBITDA margin and ROE all increased to 55%, 63% and 44%, respectively. And I had mentioned earlier that the Board of Directors has declared an interim dividend of $0.075 per share, unchanged from a year ago. There are 2 other things that I wanted to bring to your attention. The first is that from fiscal year 2021 onwards, SGX will adopt the new risk-based approach to quarterly reporting. We will cease quarterly reporting and instead report on a half yearly basis. In between our half yearly financial reports, we will continue to provide voluntary business updates through the monthly market statistics that is available to the public, which is used by the analyst to understand the performance of SGX on a monthly basis. We will also continue to pay dividends to our shareholders on a quarterly basis. If you look at the balance sheet of SGX for this quarter, you would have noticed that we recorded $300 million of short-term borrowings. This was for the acquisition of Scientific Beta. Our plan is to replace the short-term borrowing with long-term funding in new costs. Given SGX's strong cash flow, we do not foresee any difficulties in servicing the debt.

I'll now hand it over to Boon Chye, who will present the business update. Thank you.

[Boon Chye Loh, executive]

Thank you, Chng, who has just shared with you our results. There was the higher trading activity on our markets in the third quarter driven by uncertainty of the impact and duration on economic activity as a consequence of COVID-19. The geopolitical tensions in the global oil markets further added to the turbulence. Accordingly, volatility has significantly increased. There is correspondingly a higher demand for risk management solutions and activity in the cash equity markets as investors adjust their portfolios. We've seen trading activity increase across equities, currencies, and commodities asset classes as investors use our multi-asset platform to manage their portfolios across these asset classes. T+1 trading activity or trading in non-Asian hours and the reflection of international participation also increased to 20% of all contracts traded. This is up from 15% in the previous quarter and from 14% a year ago, highlighting the importance of continued price discovery and round-the-clock risk management in volatile times.

Let me now move on to our respective business lines. In fixed income, we had an increased number of bond listings, which is up 18% year-on-year to 325 bonds. Total amount raised was SGD 136 billion, up 2%. Indeed, it was a quarter of 2 halves as volatility in the credit market in March led to a slowdown in bond issuance. In currency, volumes was up 45% year-on-year to 7.8 million contracts. Open interest at quarter end was also up 16% year-on-year to USD 7 billion. COVID-19 and the oil shock mix impact felt in March, as investors hedged exposures to different markets and multiple asset classes, including currencies, the aggregate volume of SGX FX futures rose 58% year-on-year to close to 3 million contracts, the highest ever.

In U.S. dollar terms, this was at USD 172 billion, up 72% year-on-year.

Another development, whilst not actually in written yet, the futures volume on the Korean yuan and the Singapore dollar all had their most active months.

In commodities, there were strong volume increases across iron ore, freight and rubber from greater demand for risk management as a result of physical market disruptions. In particular, iron ore volumes increased 36% year-on-year to 6 million contracts. With iron ore growing in appeal as a macroeconomic, proxy financial participation has increased, and our iron ore screen market now comprises 20% of all our iron ore futures contracts traded.

Screen volumes reached a record 55,000 lots on the 24th of March. In January, we added iron ore to our Titan OTC Pro platform to increase matching efficiency in the broker-driven OTC market. This additional avenue to access OTC market liquidity was timely in addressing some of the current challenges with workplace disruptions. This is supported by continued efforts to enrich the Titan hub with additional external party content useful to our clients. For those of you who are not familiar with the Titan hub, the Titan hub is the information and community portal that provides news, insight and analytics for clients interested in SGX derivative products. It is currently accessible to Titan OTC users, but it will be open to a wider community in the near future.

Moving on to equities and starting with equity derivatives. Volumes increased by 24% year-on-year. The equity markets too had a tumultuous March and trading activity increased across the board. As an indication of international investors seeking to manage their portfolio, the T+1 session contributed to 20% of total equity derivatives volume. In equities listing, we had 5 new listings. Total primary and secondary fund raised in the third quarter was SGD 1.2 billion and was 2x year-on-year. There were a few firsts with Elite Commercial REIT being the first Sterling-denominated REIT listing in Asia and Don Agro, the first Russian company to list on SGX. Total primary fundraising in the financial year-to-date was SGD 2.3 billion and has now exceeded all of the FY 2019. However, we can expect a slowdown as issuers postpone their IPO plans amidst the pandemic, but our platform remains open for issuers who want to tap the capital markets.

In cash equities, trading and clearing, total traded value stood at SGD 101 billion, an increase of 63% year-on-year. In addition to increased trading and cash equities, we also saw higher activity in the other products category. For example, in March, total turnover for our DLCs, daily leverage certificates, reached close to $570 million, which is more than double the previous month. Turnover for single stock DLCs increased 90% month-on-month in March to over SGD 400 million, accounting for 73% of overall trading activity in the other product category. As the demonstration of DLCs flexibility to trade both rising and falling markets, single stock, the short single stock DLC comprised 54% of total turnover with the long DLCs ticking up the balance 46%.

Market turnover value of ETF saw the biggest jump in March, increasing to SGD 1.2 billion, more than threefold compared to February. The other products category is an area that we're looking to grow, and we will continue to expand the investment options available to investors.

Moving on to our data, connectivity and indices business, revenue grew 26% year-on-year. This has led market data and indices businesses, with revenue up 53% to $17 million and with Scientific Beta contributing SGD 6 million.

To recap, Scientific Beta is an independent index provider specializing in smart beta strategies. A smart beta is an investment strategy that uses a set of objective factors or criteria other than market capitalization. These factors could include value, momentum, low volatility, high profitability, low investment and size. We're integrating Scientific Beta and look forward to exciting product innovation opportunities and serving a wider range of clients across geographies and client types moving forward.

Looking ahead, the outlook of markets remain uncertain. The IMF has projected that the global economy could contract sharply by negative 3% in 2020. Any subsequent recovery is fraught with uncertainty, particularly if the pandemic and containment measures last longer. Amidst the evolving environment, it is critical that our platforms remain resilient, relevant and acceptable to our clients. The safety of our staff and customers remain a priority, and we have launched a SGD 5 million SGX care package aimed at funding national health care support programs and introducing measures to assist staff and listed companies affected by the pandemic over a 12-month period.

For our retail investors, while our CDP customer service center is closed from 18th April until further notice, CDP services continue to be acceptable through the Internet, telephone and mail. Investors can also arrange for a video call appointment. With higher market activity, launch of the SGX care package and the acquisition of Scientific Beta, we have revised our FY 2020 operating expense guide to between $485 million to $495 million.

This concludes our presentation, and we'll now move into Q&A. And you can see from the screen, various colleagues of mine who are joining this Q&A. But before we answer your questions, let me first introduce our Deputy CFO, Mr. Ng Yao Loong, who joins for his first results briefing. I will have him say a few words.

[Yao Loong Ng, executive]

Thanks, Boon Chye. Good morning to all, and I see a couple of familiar names that have joined this call. I would have very much preferred to meet all of you in person, but clearly, we are not in normal circumstances. But nonetheless, I look forward to engaging and hearing from each one of you in the coming months. And without much further ado, I suggest we get the Q&A session going. Back to you, Boon Chye.

[Boon Chye Loh, executive]

Thanks, Yao Loong. Let's now look at the first question.

[Dominic Lim, executive]

Okay. Thank you, Boon Chye. So there is a first question coming in from Macquarie Securities. It's on our dividend. So the question is the dividend is flat in dividend per share terms. Now your company's policy is we aim to pay a sustainable and growing dividend over time, consistent with the company's long-term growth prospects. Could you share if your dividend would increase in future quarters?

[Boon Chye Loh, executive]

So thank you for the question. From the financial year 2019, we stated that SGX will pay a dividend of $0.075 per share per quarter, and we aim to pay a sustainable and growing dividend over time, consistent with the company's long-term growth prospects. But I think what is important is that the new policy that we implemented in FY 2019 will give and provide flexibility for SGX to balance our dividend payments with the need to retain earnings to support growth. And you have also noticed that in the last 2 years, as you stated, that we want to scale up our multi-asset platform. We've also done -- made bolt-on acquisitions and our strong balance sheet. We've got cash-generating businesses that allow us to do that. And as the business grow, and as we scale up, the intention subject to the Board's approval is clearly to increase our absolute level of dividends to our shareholders.

[Dominic Lim, executive]

Okay. Thank you very much. There is another question that is also from Macquarie Securities. Contribution to your derivatives market, the T+1 session contributed 20% to overall derivatives. If you were to strip out the volatility seen in the recent months, would your underlying growth, given the structural push SGX has been doing in broadening the client base, how would you see the underlying growth perform?

[Boon Chye Loh, executive]

Well, I think if I understood the question correctly, you're looking or asking what is the underlying base of the participation -- or underlying growth of the participation from the international investors or small defined as our T+1 session. I think what's important to note is some of the international participants are also present in the Asian time zone, but the T+1 session really measures activities largely when the Asian markets are about to close or closing other than those markets, in particular, FX, that trade almost round the clock. So the overnight or round the clock platform allows us to provide that kind of participation for investors who want to do that. But to answer your question, if I look back, I think 3 years ago, the T+1 session at the contribution volume would have been less than 10%, probably in the region of 8%. And while we have 20% in this quarter, if we look at it on an annual basis, a year ago, that was close to 15%. So I think our aim with the setup of our international offices, partnerships and engagements is to really grow the participation in the single-digit number. There is no target we aim for, but clearly, as we engage more clients, what will also drive our performance is the cross-asset classes. We don't really -- our clients don't really look at us to just trade in one single asset class. And I think that multiple assets classes availability will be important equally.

[Dominic Lim, executive]

Thank you for the answer. The third question from Macquarie Securities is Scientific Beta's revenue is $5.9 million, appears to be above cost and a positive contributor. So what are your plans in rolling out more AUM tracking products? And what are the expectations for the next financial year?

[Boon Chye Loh, executive]

Yes. I'll let maybe Chng and then Kin Yee, you guys want to address that?

[Lay Chew Chng, executive]

Kin Yee, do you want to take that one?

[Kin Ng, executive]

Sure. Kin Yee. Early trends have gone very well for we are experiencing certainly uncertain market condition, and no one can predict the asset prices. However, we are confident that the passive strategies will continue to perform well. We expect to roll out more offerings in the coming financial year and that is fruit of some excellent surge that has been invested so far. I'm personally very impressed by the [indiscernible] work that we have done both in terms of thinking and responsiveness to the market needs. These offerings will cater to growing low-carbon and ESG concerns. Others are enhancements to respond to developments you've seen in third quarter this year, and we'll offer some unique defensive strategies.

[Dominic Lim, executive]

Thank you very much, Kin. The next question is from Morgan Stanley. Could you explain the higher loss in associates in the JV line? What has driven that, please?

[Lay Chew Chng, executive]

Perhaps, I can take that. This is Chng. We have explained in previous quarters that our investments. We have been investing in a portfolio of companies, some of which in the early stages of growth, some that are more mature. What we are seeing is that some of our associated companies are, as expected, generating some losses. And as they are associated companies, we record our share of their losses in our results. So this is not something that is unexpected. They are a portfolio of young companies that we seek to grow, and these companies have also added on benefits to the rest of the businesses in SGX as we learn and collaborate with each of these companies.

[Dominic Lim, executive]

The next question comes from JPMorgan. It's on Scientific Beta. How has that been performing year-to-date? Has the risk adjusted returns been better than the broader market? And how does that bode for growth in products over the next 12 to 18 months?

[Boon Chye Loh, executive]

Well, this is Boon Chye. Let me take that and then Kin Yee, you can chime in if you like to. So I think I would say it's important to see what is the reference point of the reference portfolio. But broadly speaking, the Scientific Beta strategies have performed better in some cases and has underperformed in other cases. And I say that because it really depends on what is the authority as a reference. So it's a portfolio that is subjected to market cap and has focused largely on large index stocks and, let's say, large tax stocks, that portfolio probably would have performed better relative to any other strategies. Smart beta strategies included in the calendar year of first quarter 2020. But broadly speaking, I would say the risk-adjusted returns has not done too poorly. And importantly, as part of the Scientific Beta strategy, the client servicing ability to analyze and explain specific sector performance, I think, bodes well in terms of the volatility that we're likely to see in the coming months. Kin Yee, anything you want to add?

[Kin Ng, executive]

Thanks, Boon Chye. Yes, I can't agree more. Ultimately, factors like volatility, momentum, profitability, many of them are actually showing very good reward in terms of FX exposures, that's the thing. They just have to take it. But to answer the second question about growth in products over the next 12 to 18 months, as I mentioned earlier, we are very excited about all the different products that can come out. In fact, the current market situation has actually yielded some very interesting insight for us to be able to continue to develop more enhancements to the indices to offer to our investors. Over to you, Boon Chye.

[Dominic Lim, executive]

Thank you for that question. The next one comes from Goldman Sachs. Can you explain the fall quarter-on-quarter in dividends -- derivatives clearing rate, sorry, for more than SGD 1.2 previously to currently SGD 1.1? That's the first question. Second question on Derivatives also. Is the collateral management revenue for open interest of contract was up a lot quarter-on-quarter? Is -- our margin balances for open interest still being raised after this quarter?

[Hsien-Min Syn, executive]

This is Mike. Thank you for the question. The first question on the fee per contracts, on the portfolio, quarter-on-quarter. I think if you looked at 3Q and the 4 quarters preceding that, you'll see that actually the outlier was 2Q. That's to say that fee per contract was relatively flat for all the previous 4 quarters and 3Q. The outlier was the very low volume, the unseasonably low volume in 2Q. So the observation, I would take from this is that the year-on-year shows a much more interesting picture or lot more insightful picture than a Q-on-Q. Because on the year-on-year, you see that not only has volume increased across the franchise but that the fee per contract has remained relatively stable. This is due to a mix of factors which drove the volume increase in third quarter. Clearly, there was more trading by the active trader community and on average that tends to lead to some fee compression. But as Boon Chye also earlier alluded, the very nature of the kind of rolling new slope into this COVID crisis has meant that not only has there been significant demand from end customers, but this has been around the clock. So the average effect across commodities, FX and equities has been -- if you look at the year-on-year, not only have volume increased significantly, but perhaps unlike previous scenarios, the fee per contract on the portfolio has remained relatively stable.

The question on margins. Well, clearly, margins are managed purely from a risk management perspective. It's not anything other than that. So the way margins are set somewhat are backward looking, but definitely in reaction to what we anticipate may happen over periods of time. So the margin collected, the contract is a function of 2 things. One is the value at risk per contract. But secondly, for the contract in specific, is it a large notional contract or a small notional contract? So the end of March saw some tailing off in realized volatility in the market. But I think as a risk management infrastructure, we did not react very quickly to that. And we still have what would be considered elevated margins compared to 2Q -- second quarter last year.

[Dominic Lim, executive]

The next question is from CIMB. It's also on Scientific Beta. So wondering if market polite volatility has or is expected to have any impact on Scientific Beta's business in terms of its AUM, client expansion and product innovation pipeline would be helpful.

[Boon Chye Loh, executive]

So this is Boon Chye, let me take this question. So the AUR, asset under reputation, the -- where most of the clients look at this is the average balance for the quarter on a monthly basis. So for the quarter, if we just look at broad equity indices, that clearly has come down. There is indeed some recovery towards the end of March. So you just clearly from the quarter standpoint, there would have been a decline in some percentages of the asset under reputation. However, one should look at this more so from a monthly average and the fees are then charged on a quarterly basis. In terms of client expansion and product innovation, the client engagement by our colleagues in Scientific Beta continues. Obviously, this is now done digitally, no different from many of us, even some of my colleagues within SGX engaging their customers, their clients. In terms of product pipeline, there are some that both our teams are working on. It's too early to mention any at this point in time.

[Dominic Lim, executive]

Okay. Thank you, Boon Chye. There are 2 questions from Crédit Suisse. The first one is the derivatives contract is down. It appears that it could be largely driven by FICC derivatives fees. Could you give more color on this? And the second question is volatility still appears to remain high. Given this backdrop, how has Derivatives volumes trended so far in April month-to-date relative to March?

[Hsien-Min Syn, executive]

Okay. This is Mike again. Thank you for the question. Actually, I'll just repeat what I said earlier. If I look quarter-on-quarter versus year-on-year, if you compare 3Q to the preceding 4 quarters, what you will see is that the preceding quarter was an outlier. Fee per contract was significantly higher, meaning that was an anomaly for both FICC and equity, that's because volumes in the second quarter were relatively low. But if I look at the preceding quarters, both FICC and equities have seen the contract relatively stable, even though volume is significantly higher. So I think that's probably the -- if you look at the historicals for the last 4 quarters, that's what you will also see.

On the second question, given that volatility has remained high. How has volume played out so far in this month? Actually, the realized volatility has been different across our portfolio. If you watch the S&P daily, it still looks like a 40-wall contract. But if I look at Chinese A shares, because of the nature of the early COVID recovery in China versus the rest of the world, this has panned out very differently across our portfolio. So actually, Chinese A shares, as you know, have outperformed significantly versus almost all markets on a sharp ratio basis and an absolute price basis, and volatility has remained low. For all of our other markets, the one with the highest volatility is probably still FX and the Indian contract. Overall, end customers who were extremely active in 3Q have been relatively quiet so far for the last couple of weeks. I think you can see this across the board where leverage money, fast money, even real money are trying to figure out where this market goes before they commit again. We see that the active trader community continues to be active even though with the circuit breaker measures that you've seen in Singapore and elsewhere. They're having to, at the same time, deal with having to constantly figure out how they operate their trading. I'm glad to report that they are trading. Operations are active. Active traders continue to be operational. The end customer for the last couple of weeks still seems to be directionless, and I think we're waiting to see what the market brings in the next couple of weeks.

[Dominic Lim, executive]

Thank you, Mike. So the next question is from Jeffrey Tan from the The Edge Singapore. You said there is a slowdown in listings amid the pandemic. This is expected. How bad will this slowdown be?

[Sutat Chew, executive]

This is Sutat. Jeffrey, good to hear from you and see that your well. It is indeed clear that COVID-19 does have an impact on these things globally with many ecosystems affected. In addition, investors are getting increasingly conservative about the current climate. Despite this, we do see some bright spots in more resilient sectors such as health care, technology and sustainability, which continue to operate positively, and we are seeing some of our existing listed companies also been able to do well in new areas like COVID testing kits, et cetera. But beyond IPOs, it's actually more important to look at SGX as a platform for ongoing fundraising, including our debt market. So it's not just about bringing companies here to list, but about facilitating the fund-raising activities as and when there is a need for it. So in this environment, there is more needs potentially for existing listing companies for secondary fundraising and both secondary and primary fund raising year-to-date has actually exceeded the previous years already. So the potential secondary fundraising, recapitalizations, additional placement right issues, that also contributes to turnover, and we are quite excited about that opportunity. So we will facilitate and help companies raise funds in the primary and in the secondary market. And we do see that there are opportunities and winners and losers with many bright spots also in this environment.

[Boon Chye Loh, executive]

Jeffrey, this is Boon Chye. Just to provide and supplement that. In our pipeline, some companies have continued with the IPO preparation. Some given the degree of impact of disruption to their business have paused. What is so important is which we had a comment on the listing of AMTD in April. What is also important is the second relisting of such companies have also further fueled discussions of similar type of tech companies and more importantly, on secondary listing of some of these companies, demonstrating that the market is available and also the process, the list is simpler than what the ecosystem was used to. So I think all this has to be taken in totality. And a lot will also depend on what sectors, what businesses that may or may not be impacted, what certain sectors that could actually do better in such an environment, and those will be ones that were continuing with their preparation.

[Dominic Lim, executive]

There are several questions from Nicky. First question is how sustainable is the high end volume of the equity market as economic activities become more subdued? The second question is, how is the situation in the current quarter and outlook going forward in the next FY? And the final question is, can you give us an update on the number of listed companies that have already indicated that they will be moving to half year result announcements.

[Hsien-Min Syn, executive]

This is Mike, maybe I'll attempt an answer to the first part of this question, which is about our stock market. It's very hard to say what the situation will be going forward because that depends entirely on how the economic trajectory and the market trajectory goes. I think there are very interesting things to observe about what happened in our stock market during this sell off. The volume increased very significantly. When I say very significantly, I mean, more than you would expect looking at the Asian peer group and this is because volatility has been very low in preceding quarters, such that many of our stocks, which are high-dividend, high-quality stocks were trading in very limited ranges. And therefore, we did not see that much turnover, okay? What happened in the month of March, in particular, was we saw that while investors were selling across the board. This was largely driven by institutions. And if you look at the direction of the stocks that were coming down. They were all highly correlated, meaning this was largely driven by indexation rather than stock selection. Now the interesting point is who was buying these shares. And it was, by and large, retail. The retail proportion of participation in our market, not just in products, but in also the index stocks and REITs increased by a couple of percent. And what this indicates to us because when we look at the active accounts we traded in March, we did not trade at all in the year before. This was almost 50% more than before, something like 50,000 more accounts, which had not been active for a year, came in, in March to invest. So going forward, if we see that the economic scenario plays out in such a way that retail investors feel underinvested or underdeployed and see that there is value to be had in a 0% interest rate environment to invest in the Singapore stock market. We think that this has been shorten the arm for people who now recognize quality versus momentum stock markets. So that part has been interesting. There are also a number of measures that we're taking in the stock market to make sure that we profile the trading qualities of the stock market better, both to regional retail investors and international investors. And those things are in progress. I could talk a little bit about that later along the lines of single stock futures.

[Boon Chye Loh, executive]

This is Boon Chye. Just to share the outlook around this question in a different way, more from the macro standpoint. I think we are still early unfortunately in the COVID-19 phase. Different countries entered into the COVID-19 situation at different times. Any economic forecasts at this point in time, I think, are very highly likely to be subjected to revisions going forward, upwards or downwards until there is some control on the scale or spread of the COVID-19 and until there is a path of a certain pace of a restart and having people going back to, I think, the economic outcome, the impact, the duration is still highly uncertain. And that kind of environment really calls for a lot more nimble and more frequent adjustments of portfolios as the outlook starts to drip in only until countries have a sense of how big the duration of the impact will be.

[Boon Gin Tan, executive]

Yes. This is Gin. I -- to answer your question on quarterly reporting. So majority of the companies are still on quarterly reporting. And going forward, in this environment, even if companies do move away from quarterly reporting, I'd like to highlight that our quarterly reporting framework adopts a risk-based approach, and it is already provided for that if the company research, financial issues such as material uncertainty as a going concern, it has to do quarterly reporting. And we have also, at the same time, add the changes to quarter reporting, enhanced our continuous disclosure regime. And one of the changes was to strengthen our profit-earning requirements so disclosure must be made if this deterioration in near-term earnings prospects. And all this is actually covered in guidance that we issued just 2 days ago on reporting on the impact of COVID-19.

[Dominic Lim, executive]

Thank you. Another question from Macquarie Securities. Any update on single stock features and any plans for a Stock Connect with India or possibly other ASEAN markets?

[Hsien-Min Syn, executive]

Okay. So on single stock futures, clearly, we already have a number of Indian single stock futures already listed. They were actively used throughout the period of the last quarter. And I think as a matter of operational stress testing, they did well and were well used, and that gives us confidence that the next phase of what we want to use single stock futures for, which is for the Singapore market itself, that should be on track for middle of June, subject to regulatory approval. That's our next significant expansion of what we seek to do in this format, which is to bring single stock risk premium to our global derivatives customers who might otherwise not have the ability to access in a single portfolio. So the next phase of what we're doing is in Singapore, single stocks. There are many reasons to believe that there is untapped demand because we have observed that access to Singapore risk premium is actually split between people come to our stock market directly and people who come to our [indiscernible] key futures, the turnover of which is in itself, another 1 billion a day, right? So we call these activities typically index arbitrage. We believe that listing these Singapore single stock futures will improve the prospects for index arbitrage, and there are absolutely new trading or arbitrage opportunities that will bring more liquidity not just to our Derivatives platform, the single stock futures platform, but this will also lead to better liquidity in our stock market.

One of the things that is kind of common threat or a golden threat, if you like, through how we decide what the right phasing for this is, it's firstly to understand, is there actually untapped user demand? But secondly, because it's a single stock future, we need to make sure that all corporate action announcements and news announcements, in line with what Boon Chye had mentioned earlier, these are things that we can propagate clearly or make sure that the information is easily available in english. So if you think about what we could potentially do further in the single stock platform. These are things we have to make sure that we have in place such that there is fair and equal access to information while accessing the single stock futures. There are a number of ways that we can also bring single stock risk premium to our customer base. Boon Chye mentioned one, the DLCs. Other ways that are common are through things like depository receipts. So with respect to connects with other marketplaces, we are actually in discussions with a number of other marketplaces. This is a very common occurrence between exchanges, about how we could go about building connects both for single stocks and for indices. And as these develop, will keep you posted. With respect to India, discussions with the NSE on the gift link are going very well. I think in the past 2 to 3 weeks, we have come to some kind of alignment with our partners at NSE that probably we will have to move some of the time lines a little bit further forward until the lockdown in India and the circuit breaker in Singapore clears up because it's proving relatively difficult in this period to continue fully productive discussions which involve partners, vendors and site visits on each side. So the talks are going very well. We expect that the timelines will be shifted forward because of this unfortunate occurrence of both the lockdown in India and the circuit breaker in Singapore, and we will keep you posted on any further material announcements with respect to the Gift project.

[Dominic Lim, executive]

The next question is from CLSA. In your treasury business, what is the sensitivity to open interest? And what's the sensitivity to a lower rate -- interest rate environment?

[Lay Chew Chng, executive]

So let me take that. A lower interest rate environment would definitely dampen the returns that we get on the investments that we've made on our collateral balances. However, we would expect some mitigation from higher collateral balances. And one of the reasons from the higher collateral balances and during volatile times, we would expect to have higher margins on the same amount of overnight interest that we would have from our market participants. So overall, yes, there will be a dampening of our treasury income. However, we do look at potential mitigating effects from higher collateral balances. Thank you.

[Dominic Lim, executive]

Thank you very much, Chng, for your answer. Boon Chye earlier -- this question is from Business Times. Boon Chye earlier mentioned about moving into a digitalized -- moving to digitization. Could you elaborate a little bit more on what more are you looking at, perhaps M&A activities?

[Boon Chye Loh, executive]

Well, I say organization will embarked on these digitalization path in the last few years, one of the more visible ones was the introduction of the new post rate. But what we are also rolling out is an investor portal to complement the SGX Mobile app, the investor portal world in future also offer FX conversion services, most offer IPO applications. So this is the path towards making services more digital for our customers.

But beyond that, and to answer your questions in terms of M&A, as we said, for a while now and having now cemented our multi-asset solutions and investment platform. We want to continue to scale up, but truly now Asia's most international multi-asset exchange. So what we've said before was to scale up in the different asset classes, FX and index with those that we mentioned, we had our own development in the fixed income platform. So that's one category in terms of asset classes. I think the other category that we can think about and think about is also our equity market. They are clearly also that platforms could enhance reach in equities. Now that we've put cash and derivatives into one platform, where we can now access our pool of institutional market makers and liquidity providers, they are very accustomed to address this business into the cash equity businesses. So there's one category in terms of potential area to think about.

And the third area, broadly speaking, is in the software workflow data. And the thinking around that really is while we had a very low rate environment post the financial crisis of 2008, the current situation of COVID and with government and Central Bank reacting, we're likely to see another prolonged period of low interest rates. In all of the environment, the rationale that we had, as we have mentioned before, in terms of low rates, passive investing, but all this really means it is important for financial participants to find efficiencies in whatever they do in their workflow. And that's an area that I think will complement SGX, and that's an area that we will study is still way too early. It's a very broad field, but it's an area that we looked at.

[Dominic Lim, executive]

Okay. Thank you, Boon Chye, for your answer. I think at this time, we will take some of the remaining questions offline. And I'll just hand this over to you, Boon Chye.

[Boon Chye Loh, executive]

So with that, we'll bring this briefing to a close. Thank you, once again to all of you for joining us today, and we look forward to seeing you again at our full year results briefing. Thank you very much. Keep well, stay healthy.

[Hsien-Min Syn, executive]

Thank you.