U.S. Markets open in 4 hrs 38 mins

Edited Transcript of S68.SI earnings conference call or presentation 20-Apr-17 10:00am GMT

Thomson Reuters StreetEvents

Q3 2017 Singapore Exchange Ltd Results Briefing

Singapore May 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Singapore Exchange Ltd earnings conference call or presentation Thursday, April 20, 2017 at 10:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Boon Chye Loh

Singapore Exchange Limited - CEO and Executive & Non-Independent Director

* Boon Gin Tan

Singapore Exchange Limited - Chief Regulatory Officer

* Lay Chew Chng

Singapore Exchange Limited - CFO

* Muthukrishnan Ramaswami

* Sutat Chew

Singapore Exchange Limited - Head of Equities & Fixed Income and EVP

================================================================================

Conference Call Participants

================================================================================

* Nicholas Lord

Morgan Stanley, Research Division - Head of ASEAN Banks Research and Executive Director

* Rikin Shah

* Robert P Kong

Citigroup Inc, Research Division - Director and Deputy Head of Regional Financial Institutions

* Seng-Choon Leng

RHB Research Institute Sdn Bhd - Research Analyst

* Andrea Tan

* Mayuko Tani

* Yen Nee Lee

================================================================================

Presentation

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [1]

--------------------------------------------------------------------------------

Okay. Very good evening. Thank you for joining at our third quarter FY '17 briefing. I would characterize the third quarter as one with a robust set of results despite a volatile geopolitical landscape.

The headline numbers are as follows. Net profit of SGD 83 million, down 7%. This includes a $4 million loss from the disposal of our shares in the Bombay Stock Exchange. Excluding this one-off loss, net profit would have been $87 million, down 2% from a year ago.

Our revenue for the last quarter was down 2% year-over-year to $203 million.

Expenses was on the bright side. It was down 3% to $100 million. The other positive note is there was a positive jaw of 2% for the quarter. And for the 9 months year-to-date, the jaw is about flattish, negative 0.4%. We look forward to narrow the jaw from what it was, minus 4% in FY '16.

What is also important to note is that the operating profit remain unchanged versus last year.

On the equity business, there was increased participation seen from both retail and institutional customers. Derivatives volumes was down to 18%, revenue down 9%, but the positive news there is the average fee per contract increased from $1.15 to $1.20.

With that, let me hand over to Chng who will take you through the financials in detail. I'll come back and talk about the segmental performance.

--------------------------------------------------------------------------------

Lay Chew Chng, Singapore Exchange Limited - CFO [2]

--------------------------------------------------------------------------------

Good evening, everyone. Let me take you through the performance for the third quarter of fiscal year 2017. This slide shows the quarterly trend for revenue expenses, operating profit and net profit for the past 5 quarters.

We reported a net profit of $83 million for the quarter, a decrease of $6 million or 7% from the previous year. That's on a reported basis as Boon Chye has mentioned earlier. If we exclude the one-off loss on $4 million on our sale of the investment in Bombay Stock Exchange, we would have reported a net profit of $87 million. So that's a decline of $2 million year-on-year and just a $1 million compared to the last quarter.

Revenue decreased by $3 million to $203 million. Our equities and fixed income and market data and connectivity businesses both recorded year-on-year increases. This was partly -- this was offset by a decline in our derivatives revenue.

You will recall that during the same quarter last year, there was much higher volatility. There was a global equity sell-off sparked off by fears of a slowdown in China as well as volatile oil prices.

Expenses decreased by $3 million to $100 million. And as Boon Chye also mentioned, we have a positive jaw of 2% for the quarter compared to a year ago.

This next slide I have shows the revenue movement on a year-on-year basis. I'll go through the performance of each of our 3 businesses.

So for Equities and Fixed Income, it comprises Issuer Services, Securities Trading and Clearing and Post Trade Services.

Revenue for the quarter increased by $1 million to $103 million and it represented 51% of our total revenue.

Issuer Services comprises of equity and bond listing and corporate action revenues. This was comparable with last year at $19 million. We had 189 bond listings that raised $101 billion, highest in the last 5 quarters.

Securities Trading and Clearing revenue was comparable at $55 million. Compared to a year ago, our SDAV rose by 1% to $1.24 billion. Average clearing fee dipped from 2.9 to 2.8. That's primarily due to higher composition of lower-yielding structured warrant volumes. Our total traded value went up by 5%. There were 2 more trading days this quarter versus same quarter a year ago.

Post Trade Services revenue comparable at $29 million. There was a 7% increase in security settlement revenue as a result of a higher number of settlement instructions. There was a -- in terms of our contract processing revenue, there was a decrease of $1 million due to a lower number of contracts processed as well as a move by us to -- from paper to electronic contract statements.

As highlighted in last quarter, contract processing will progressively be performed by brokers as they migrate to their own back office systems.

Derivatives revenue decreased by $7 million to $75 million primarily due to an 18% drop in trading volumes. However, average fee per contract rose from $1.15 to $1.20 that's mainly due to a change in the mix of derivative contracts. And this business accounts for 37% of our total revenue.

Market Data and Connectivity, this was a stable and a steady business, increased 13% to $24 million in terms of revenues as we had higher reported data usage and our co-location services business continue to grow.

Our next slide is on expenses. So we managed to reduce our expenses by $3 million compared to a year ago. And that's primarily due to one is lower volume-related processing royalty expenses as well as professional fees.

Note that in this quarter, we also recognize $1.5 million in terms of SGX's contribution to co-fund brokerage firms implementation of measures that were recommended by the Securities Industry Working Group.

This quarter's expenses compared to a year ago also included the expenses of the Baltic Exchange which we acquired last October.

Total staff cost increased by $2 million or 4% to $41 million. This is mainly due to the inclusion of the Baltic. Fixed staff cost increased by 2% and provisions for variable staff cost increased by a $1 million.

We have increased average permanent headcount year-on-year by 40 to 794. Out of the 40, 32 is actually from the Baltic Exchange. So you can see that we have been quite careful at managing the headcount growth.

Technology expenses remained flat $SGD 32 million. Systems maintenance expenses fell by 4% due to our successful negotiation of vendor charges.

Depreciation was flat year-on-year, but it was up 12% quarter-on-quarter. As I mentioned in the past quarter, depreciation and systems maintenance and rental expenses would catch up. I mean, in the past few quarters, we are benefited from systems that reached end of life, but new systems have kicked in and we expect to see catching up this quarter to continue for another 1 or 2 quarters.

Processing and royalties, I mentioned earlier, decreased $5 million to $11 million in line with lower derivative volumes.

On a year-on-year basis, operating expenses decreased by $12 million or 4% to $291 million. Volume-related processing and royalties contributed $10 million to this decrease.

We have exercised cost discipline as demonstrated by the flat staff cost as well as the decline in discretionary cost, such as professional fees, marketing and traveling.

This is my final slide. It shows a trend of our key performance indicators for the last 5 quarters. I just want to highlight that our operating profit has been improving over the past 4 quarters and we have maintained a high operating profit margin of 51% over the past 3 quarters. We earned $0.078 per share this quarter or $0.081 per share excluding the loss from sale of us taking the Bombay Stock Exchange.

Our Board of Directors have declared an interim dividend of $0.05 per share in line with our stated dividend policy.

So with that, I end my presentation, and I'll hand the floor back to Boon Chye.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [3]

--------------------------------------------------------------------------------

Okay. This is a new slide we've not used before but I thought it'd be good to give a quick glance to the business update by the 3 segments.

If you look at the total revenue on the last line, year-on-year for the quarter you can see it's down 2%. For the 9 months year-to-date at $593 million, that's down 4%.

And looking across the slide, that's really driven largely by lower volatility leading to a decline in the derivatives revenue.

Chng has talked about some of this business segment, but I just supplement that with a few salient points. You can see on the Equity and Fixed Income business, the quarter really is about momentum that was carried through from the U.S. elections. But I think more significantly, we've seen increased participation from both retail and institutional investors.

And the second point I make there is total funds raised from both equity and bond listings saw an increase of 12% versus last quarter and was almost 2x year-over-year.

The listing pipeline remains healthy, and we see sustained interest by local and international companies in a market seeking listing on both the main board and catalyst. We'll continue to build on our sectoral strength approach and [actively] highlight the value proposition of listing on the SGX.

To encourage retail participation in the market, come May, issuers will now need to allocate 5% or $50 million of the offer size, whichever is lower, to retail investors.

In terms of the Securities Trading and Clearing, let me share with you the increased participation by both retail and institutional clients.

Quarter-on-quarter, retail participation grew 18%, institutional participation grew by the 14%. Year-on-year is 7% for retail and 2% for institutional investors.

The SDAV while is comparable versus a year ago, this is however the highest quarterly SDAV since 1Q 2013. Post trade was steady up 1%.

Let me now look at the Derivatives business. The middle part of the slide gives the overall derivatives volume. We then break down the equity derivatives on the far right of the slide.

The overall decline was primarily driven by lower volume in our A50 contract. That said, the market share gains across some of key contracts are as follows. In China A50 despite the lower volume, our market share went up from 32% to 34%. For Taiwan futures, it went up from 19% to 25%. And in the India Nifty futures, it went up from 40% to 48%. However, Nikkei saw decline from 17% to 16%.

On commodities, revenue did decline but DAV remain comparable year-over-year. The decline was mainly due to lesser participants trading the higher-yielding INO swaps.

On a market share basis, this quarter, we increased our market share from 91% to 96%, that is despite scaling back some rebates that brought the overall average clearing fee in our business from 1.15 to 1.20.

On Market Data and Connectivity, that's clearly proven to be a stable business sustaining a portion of our revenues. The market data revenue increased by 16% based on higher data usage. Connectivity revenue also increased by 11%, and that is due to a continued growth of our co-location service business.

So now let me hand over to Boon Gin, our Chief Regulatory Officer, to give you an update on the regulatory front, and then I'll round up with the outlook, and we'll take Q&A.

--------------------------------------------------------------------------------

Boon Gin Tan, Singapore Exchange Limited - Chief Regulatory Officer [4]

--------------------------------------------------------------------------------

Thank you, Boon Chye. So these are the regulatory highlights for the quarter. We took action against 5 trading reps for creating a false market. At the same time, we issued a Regulatory Column to make clear for the first time the factors and the OB markers that we take into account.

I've said this many times, in the disclosure-based regime, a regulator must also be transparent, and that's why we decided to be as transparent as we can about this.

We also announced 2 initiatives on corporate fundraising. The first, as Boon Chye mentioned, is to mandate a minimum retail allocation of 5% for Mainboard IPOs to encourage greater retail participation. The second is to increase the rights issue mandate from 50% to 100% to help companies raise funds for expansion or working capital.

We also launched 2 public consultations. The first is on dual-class shares. Although the consultation closed on 17 April, we have received request from quite a number of respondents for an extension of time, so we still don't have a full complement of responses.

The other consultation was on whether to have a midday break increasing the tick size in the $1 to $2 range and the forced order range. The consultation closed in March, and generally, the responses have been positive though we are still in the process of going through the details.

The other actions that we have taken include issuing a trade with caution against ISR, following the revelation in state courts that the authorities investigating John Soh for manipulating the share price of ISR and involvement in the management of the company. And we also engaged the lawyers in China and Singapore to file a complaint with the relevant authorities both here and in China against Chairman of China Fibretech.

With that, I'll hand back to Boon Chye.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [5]

--------------------------------------------------------------------------------

Okay, just to summarize what the 3Q '17 represented. It is a quarter that showed continued momentum in our equities market following the U.S. presidential election. And as I highlighted, we did see increased participation from both the retail and institutional customers.

Looking forward, while sentiments have improved, positive outcomes will be needed on U.S. economic policies to sustain the trading activities. I'm optimistic about our positioning for future growth. We remain committed to our strategic objectives and maintaining cost discipline. We have paced our hiring, renegotiated some contracts with vendors and been careful on discretionally expenditure. This will free up resources for us to invest in growth in our future and deliver value to our stakeholders and shareholders.

So with that, let me conclude the presentation part, and we'll do Q&A now.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Robert P Kong, Citigroup Inc, Research Division - Director and Deputy Head of Regional Financial Institutions [1]

--------------------------------------------------------------------------------

Robert Kong from Citi. Three hopefully relatively straightforward questions. First of all on the cost front, you're sticking to the full year guidance that you obviously made in the previous quarter. I just -- it'd be great if you just give a little bit of detail around where the cost would pick up in the final quarter of the year because obviously that's what the implication is in terms of versus the 3Q, that there would be a bit of a bump. So just some broad idea there. Second of all, further color or thoughts on the average clearing fee. So obviously, I know it's to do with structured warrants, but we were hoping with such a nice pick up in volumes that it would translate directly on the revenues, but obviously that has not been. So is this something that we need to think about, as the volumes go up, we have to actually predict the average clearing fee will continue to come down? And the third one, which I know you'll answer in like 5 seconds, which is the Bloomberg article on discussions with NASDAQ, et cetera. I'd just love to hear your thoughts.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [2]

--------------------------------------------------------------------------------

Okay. I'll let my colleague Chng take the cost question first.

--------------------------------------------------------------------------------

Lay Chew Chng, Singapore Exchange Limited - CFO [3]

--------------------------------------------------------------------------------

So we are sort of maintaining our cost guidance at $405 million to $415 million, but we are confident that we will be coming in at the lower end of that guidance. Some of the reasons for this kind of expectation is as follows. So I'll give 4 reasons. The first is that, seasonally, the fourth quarter is normally more higher in terms of our expenditure, so there's a seasonal factor there. The second reason is because of higher staff cost and then we have hired some staff and we intend to hire more in the fourth quarter. I think we must recognize that although we exercise cost discipline, it doesn't mean that we will not continue to build or develop for the future. The third is the catch up in technology expenses. In my presentation earlier, I mentioned that technology expenses in terms of systems maintenance and depreciation has got up quarter-on-quarter. So if you look at it quarter-on-quarter, there has been an increase, and we will continue to see increases over the next few quarters. The fourth item is really we hope that volumes in derivatives will be higher in the fourth quarter, so we will have more processing and royalty expenses. But on the flip side, we should see higher revenues. So that sums up the -- my response to your question.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [4]

--------------------------------------------------------------------------------

Okay. Before I take the 2 question, just to introduce, on my far right, Janice Kan I think is a familiar face to most of you, not all of you. Janice is from our Derivatives area. Our usual line up, Michael Syn, is back in school as part of our development for management. He's at Harvard for a few weeks. He will join us back in 4 weeks' time. Okay, on the average clearing fee for the securities market, we can't quite tell the mix between structured warrants and the cash market, but I think what is important to note is even in a structured warrants or even ETFs with the volumes, it will flow back into the underlying delta. Just like in a portfolio derivatives contracts, we can't quite tell where the mix is. So I can't give you a clearer or detail answer around that, but all we want to see is if we create more structured warrants and ETFs with the issuers, we always want to think about a component back into our cash market to drive the delta volume. Okay in the Bloomberg article, so the 5-second answer is we don't comment on rumors, but what I will say is we are open and will review partnerships if it adds to our strategy of being a multi-asset exchange across different jurisdiction and obviously has to complement our strategy of improving the cash markets in terms of activity and obviously diversifying our revenue streams across different asset classes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [5]

--------------------------------------------------------------------------------

Robert, if I may just elaborate a little bit on the mix question. None of us with perfect foresight can predict the actual mix, but I think just to add on what Boon Chye mentioned about where we have the strategy of getting more products traded that creates the underlying delta back. A good example would be the REIT ETFs that has started to be listed on our exchange, and that's been a good way for getting new investor interest to actually transact not only on the ETF itself per se, but also the underlying flow back into the underlying REITs that are listed in Singapore. So you see the complementary nature of it, which is the increased REIT transactions that are actually mandated and listed in our marketplace.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [6]

--------------------------------------------------------------------------------

Okay, next question. Nick?

--------------------------------------------------------------------------------

Nicholas Lord, Morgan Stanley, Research Division - Head of ASEAN Banks Research and Executive Director [7]

--------------------------------------------------------------------------------

It's Nick Lord from Morgan Stanley. I wonder if you could just comment a little bit on some of the new business activities and how they've gone in the quarter. In past results meetings, you've always spoke about the index business, you've spoken about some of the business developments, which you've not really touched on here. So I wonder if we could get an update there. And in particular, could you touch upon the what you're doing with MAS in terms of the bond trading on the block chain?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [8]

--------------------------------------------------------------------------------

The new businesses in terms of how they're tracking, so let me lay that out in few segment. So the first, let's start off with iron ore. If you look back the iron ore segment, you saw -- you have seen a big jump in volumes from when it was launched 5 years back in year 3. That was coupled with obviously quite a bit of structure changes to the market in terms of iron ore prices. So it will take on average 5 to 7 years depending on the contract of the market, but you need to be aided by the market changes and in that case, the iron ore structure or prices, where people looking more towards a spot price than a series of contracted forward price and that helped. Secondly, I will lay to that the coking coal market. It's still very small for us. We relaunched that contract in December. For April, if we sustain what we've seen, this would have grown from frankly tiny nothing to a 1,000 contracts. I bring that up because for any contract launch, a 0 to 10,000 is your incubation period. You need that to get going to bring in the end users. And then it crosses your 20,000, 50,000 and this way it grows and which is what we are seeing today in the third new business that was incubated a while back in foreign exchange. The 2 most active contracts are the CNH today with the largest market share and have gained market share in the Indian rupee. Again, they are trading at the 1,000s level that we really want to see. And the one contract that we have not quite mentioned before is rubber. It's been around for a while, but traction is now beginning. We're now trading on average in the 6,000 to 7,000 from almost 2,000, 3,000, years ago. So once we cross that 10,000, again, this where volume will come in. Fixed income is a little slower. The system has been available, but it requires adoption of the system into the dealer's order management book, which we're onboarding at a good pace. And we'll see their volumes being transacted on the platform right now, but nothing to really shout about. But key to note is the progress we have seen in that platform is similar to what the other competitive platforms out there. So we're tracking at the same pace as what we saw their historical development was. So I pass over to Ramu to take on the -- what with MAS on chain.

--------------------------------------------------------------------------------

Muthukrishnan Ramaswami, [9]

--------------------------------------------------------------------------------

So on the distributed ledger, we've been working on various pilots. Essentially, we believe that the newer asset classes will be better served with adoption of technology that can help transaction processing in some of those. The pilot with MAS itself had multiple banks and SGX transacting on fixed income instruments in the Sing-dollar context and MAS transacting the equivalent cash, and we were trying to do a DVP in a real-time basis with multiple distributed ledgers. So it was purely a pilot exercise to see whether it was possible to do that. And so the pilot itself was successful. So we have now worked with the banks on where this can go, and we don't yet have anything that we are ready to announce as something that is formal. But certainly, there's work going on in exploring how we could improve secondary market activity in fixed income instruments using some of the newer technologies.

--------------------------------------------------------------------------------

Rikin Shah, [10]

--------------------------------------------------------------------------------

Rikin Shah from Credit Suisse. Our 2 quick questions. One as a follow-up on the cost, with the startup of regulatory subsidiary in 3Q, what could be the likely incremental cost implication? That's one. And second, how do you see the competitive landscape evolving with the advent of one more China-backed exchange FX to setup a commodities exchange in Singapore?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [11]

--------------------------------------------------------------------------------

I'll let Chng take on the [reg co].

--------------------------------------------------------------------------------

Lay Chew Chng, Singapore Exchange Limited - CFO [12]

--------------------------------------------------------------------------------

So I think one thing we must remember is that the new [reg co] is still -- it is just the formalization of our regulatory unit within the SGX group. So any incremental expenses is going to be quite minimal. There could be some additional administrative cost and of course the cost of forming an independent board. So I would say that it will be no more than $1.5 million, $2 million per annum.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [13]

--------------------------------------------------------------------------------

On competition, we welcome other exchanges to come onshore to Singapore. We can't comment on any specific exchanges coming here. If it's indeed an exchange that focuses on China, I think it reinforces our position as a unique, consistent, robust price discovery for offshore China. And if you look at our iron ore contracts, the total open interest, including China, on our exchange is 60%. But obviously volume is much larger in China, so we have 96% of the offshore market for volume. So I think that just reinforces why our strategy of a price discovery center, multi-asset strategy across different direction makes a lot of sense. And also having other exchanges onshore together with us really makes it a level playing field, at least in terms of regulation. Next question? Or any questions from people through the webcast?

--------------------------------------------------------------------------------

Unidentified Company Representative, [14]

--------------------------------------------------------------------------------

Okay. There's one question from HSBC. Can you please discuss about the market share on your iron ore product and elaborate on any pricing changes that you have made?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [15]

--------------------------------------------------------------------------------

Yes. So we did -- I did mention that in the presentation, market share gone up to 96% and that's -- so is an increase from 91%. That's despite us scaling back our rebates. So clearly, despite scaling back rebates, we're still able to capture increased market share.

Any other questions from webcast? If not, back to the audience here. Just 1 second. We'll pass you the mic.

--------------------------------------------------------------------------------

Yen Nee Lee, [16]

--------------------------------------------------------------------------------

I'm Yen Nee from CNBC. I have 3 questions. Regarding delistings this year in 2017, we have seen I think about 9, 10 and -- versus IPOs of 4. I remember [some time] that delistings is a global trend. It's not unique to Singapore. But given that SGX has put in a lot of effort to [shot] the equities market, how concerned are you that delistings will continue to outpace IPOs and hinder some of your efforts? And second questions is on Chinese companies. I noticed that among the delistings, there have been quite a number of Chinese companies. So did that affect the proportion of Chinese companies listed on SGX? And lastly, how would -- what's your take on the impact of Chinese companies leaving SGX on SGX's attractiveness as a place for these companies to lease?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [17]

--------------------------------------------------------------------------------

Okay. So one can focus purely on the number, ASEAN number of listing versus number of delisting. If you look at FY '16 itself, the total fund raised, including -- I mean IPO, RTOs, placement, rights, was about SGD 13.2 billion versus about $13.4 billion of market cap that went away with delisting. So I think it's important to look at fund raised as a additional parameter. And delisting is just part of a natural capital market cycle. The total funds that was -- or market cap that was delisted was about 0.5% of our overall market cap, which of the delisted companies on exchange, which reached SGD 1 trillion in this current quarter. A key for us is to continue to remain focus on our sectoral approach, which I said before. Today, even in the REITs sector, we no longer talk about Singapore, we no longer talk about regional. We talk about global because we have U.S., Europe and Australian REITs on our exchange. So I think the sectoral approach is important. You can target to specific region or even where you gain prominence, be in a global position. The second question, Chinese companies delisting, will it affect the proportion on the exchange. I mean today, we have about 37% of the companies listed in our exchange coming from outside of Singapore. Within ASEAN itself, there's 71 companies. So it's a very good mix. You compare that even to other exchanges, we're the highest proportion of non-Singaporean based companies that are listed here. The attraction of the exchange remains, continue, and I think if you look at even some of the companies coming from China today, those include the REITs company and for the same thing, SGX is such an attractive value proposition for some of the sectors.

--------------------------------------------------------------------------------

Unidentified Company Representative, [18]

--------------------------------------------------------------------------------

Yes. And I guess Yen Nee, just to add on a little bit on China, which was 2 of your questions. There have been some smaller Chinese companies that have been delisted and privatized, but in just the last half year, we've had [ECOV] China Xinjiang, which is a very interesting clean technology company and Dasin Retail Trust who have also listed, and each of these are between $0.5 billion to a $1 billion market cap, which is far larger than many of the companies that have, for various reasons, delisted in the last half year.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [19]

--------------------------------------------------------------------------------

Any other question here? Any question on webcast?

--------------------------------------------------------------------------------

Unidentified Company Representative, [20]

--------------------------------------------------------------------------------

Yes. There's one question from HSBC. Why did your tax rate increase?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [21]

--------------------------------------------------------------------------------

16% to 18%. That's essentially because of the fact that our loss on the sale of the Bombay Stock Exchange, that's not a tax-deductible item. So that's why the effective tax rate went up to 18%. 1 second. I'll sit to Andrea first.

--------------------------------------------------------------------------------

Andrea Tan, [22]

--------------------------------------------------------------------------------

Just on IPOs and delistings, do you expect the pace of IPOs to outpace delistings this year? And also if you could talk about any potential tie-up with the Swiss. I think there was a local media report talking about how Singapore is trying to have closer links with the Swiss on financial services.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [23]

--------------------------------------------------------------------------------

I cannot look forward to know how many delisting. I can tell you my pipeline of potential IPOs is better than what it was, so that's the relative comparison. So unless I know what is coming up in terms of delisting, but it's a better pipeline, I would say that. The article on tied up, as an exchange, we seek collaboration, we seek partnership, we also host delegations. So I would suspect the article was a result of us hosting a Swiss delegation visiting Singapore, not just seeing the SGX but seeing other financial institutions too.

--------------------------------------------------------------------------------

Unidentified Company Representative, [24]

--------------------------------------------------------------------------------

And I guess Andrea if we just go by the reports of what Bloomberg has been writing about in terms of the pipeline was coming through, both the size of funds raised as well as the number of companies are far in excess of 2016 and 2015.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [25]

--------------------------------------------------------------------------------

I think there's one question there.

--------------------------------------------------------------------------------

Seng-Choon Leng, RHB Research Institute Sdn Bhd - Research Analyst [26]

--------------------------------------------------------------------------------

Seng-Choon from RHB. Just one clarification. You mentioned about the growth in the retail and the institutional trades. My question is previously, we have this clearing fee cap, so we use that as a gauge to determine what is institutional, what is retailer. So and just now you mentioned the numbers for the institutional retail. Is it based on the same principle? Or you have data specifically for institutional clients and retail clients? And how does proprietary trading come in between these 2?

--------------------------------------------------------------------------------

Unidentified Company Representative, [27]

--------------------------------------------------------------------------------

Yes. Seng-Choon, thanks for the question. So I think it's quite some time back when we had the clearing fee cap, there was a proxy. But what we actually rely on is brokers like your firm who will tell us if the trades that are coming are either retail or institutional. So that's how we actually map it. So we get the data from what The Street actually tells us in terms of the proportionality of retail and institution, and that's how we track it. Then when it comes to proprietary trades, specifically, many of what used to be local proprietary traders have also been part of our market maker and liquidity provider programs and that's captured within that other segment.

--------------------------------------------------------------------------------

Seng-Choon Leng, RHB Research Institute Sdn Bhd - Research Analyst [28]

--------------------------------------------------------------------------------

As in the third segment? Yes, MM/LP?

--------------------------------------------------------------------------------

Unidentified Company Representative, [29]

--------------------------------------------------------------------------------

The third segment, market makers and liquidity providers.

--------------------------------------------------------------------------------

Unidentified Company Representative, [30]

--------------------------------------------------------------------------------

Okay. We've got similar questions from DBS and Goldman Sachs. Can you share other strategies that you are contemplating to further increase retail participation on SGX? And what is the proportion of SDAV coming from retail trading? And where do you expect retail trading to go?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [31]

--------------------------------------------------------------------------------

So the retail proportion in the last quarter was 25%. I'll let -- Sutat can share the programs, the research that we're doing not just for the retail but for the overall equities market, including our listed companies.

--------------------------------------------------------------------------------

Sutat Chew, Singapore Exchange Limited - Head of Equities & Fixed Income and EVP [32]

--------------------------------------------------------------------------------

Yes. So specific to the retail proportion, that has gone up year-on-year by 23% to 25% of the overall market. In relative and absolute terms, that's actually been good delta. Having said that, we do see that there's a tremendous opportunity as our retail investor education efforts as well as our corporate portfolio efforts to bring this course to see retail investors and vice versa has actually generated benefits. Good couple of examples would be how distribution of My Gateway newsletters, which goes to more than 0.25 million retail investors directly right now. We actually measure the potential transactions of those customers who have received our newsletters versus the average CDP account and that's actually twice the transaction velocity.

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [33]

--------------------------------------------------------------------------------

Any other questions here?

--------------------------------------------------------------------------------

Mayuko Tani, [34]

--------------------------------------------------------------------------------

Mayuko Tani from Nikkei. Just following up to the earlier question on Bloomberg article. You said you are open to the -- and you are reviewing the partnership. Will you be open for equity partnership with the other exchanges? And another question is about commodity derivatives. The commodity fiscal market seems to be improving. What is your -- what is the outlook of the derivatives commodity side for the current quarter?

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [35]

--------------------------------------------------------------------------------

Sorry, can you just elaborate your second question a bit? Outlook for the commodity derivatives market or...

--------------------------------------------------------------------------------

Mayuko Tani, [36]

--------------------------------------------------------------------------------

Yes, yes.

--------------------------------------------------------------------------------

Unidentified Company Representative, [37]

--------------------------------------------------------------------------------

Outlook for commodities is improving. How do we see...

--------------------------------------------------------------------------------

Boon Chye Loh, Singapore Exchange Limited - CEO and Executive & Non-Independent Director [38]

--------------------------------------------------------------------------------

How does it -- okay. Right. Any partnership could include adjacent businesses, such as our FX, our fixed income, commodities. So as long as it fits our multi-asset strategy and in that comes with the exchange, we will be having to review, evaluate. Key is really it must fit strategically what we want to do but not forgetting our organic efforts. And I started off the presentation in 3Q '17, I characterized that as a robust set of results. And then the commodities outlook improving whether an asset class has a better performance, better outlook or conversely, a very uncertain outlook, it always brings in risk management needs or requirements. So by that context, I think the market could be better.

Any last question? All right, if not, thank you very much. Thank you for joining us.

--------------------------------------------------------------------------------

Unidentified Company Representative, [39]

--------------------------------------------------------------------------------

Thank you.

--------------------------------------------------------------------------------

Unidentified Company Representative, [40]

--------------------------------------------------------------------------------

Thank you.