SINGAPORE EXCHANGE LIMITED
SGX
S68.SI
SGX to transfer regulation unit to subsidiary company with separate board
- Separate subsidiary to undertake regulatory functions.
- Segregation to address potential conflicts between commercial objectives and regulatory responsibilities.
- Enables SGX to concentrate on its core business to boost earnings.
- Maintain HOLD, TP: S$7.70.
What’s new
- SGX will establish a separate subsidiary company (RegCo) to undertake all the front-line regulatory functions it currently performs. RegCo will be governed by a Board of directors separate from that of SGX.
- MAS will continue to directly regulate SGX in terms of its obligations as a listed company and market operator, as well as maintain oversight of SGX’s regulatory responsibilities as performed by RegCo.
Purpose
- The move aims to further enhance the governance of SGX as a self-regulatory organisation (SRO) by making more explicit the segregation of its regulatory functions from its commercial and operating activities. This framework aims to address potential conflicts between SGX’s commercial objectives and its regulatory responsibilities.
- With the removal of the regulatory responsibility, SGX can concentrate on its core business, including increasing liquidity and strengthening the Securities Market, and diversifying its business mix to reduce reliance on Derivatives. Contribution to total revenue from the Securities Market dwindled to 27% in 3Q16 from 46% in FY10. Other initiatives that could boost earnings include potential M&A. A successful M&A would enhance SGX's new products and services, including futures trading and thus help to boost earnings going forward.
- Maintain HOLD on SGX, TP: S$7.70. We continue to see challenges persisting in the Securities market, as well as the Derivatives business.
LING Lee Keng
DBS Vickers
|
Sue Lin Lim
DBS Vickers
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http://www.dbsvickers.com/
2016-07-19
DBS Vickers
SGX Stock
Analyst Report
7.70
Same
7.70
