SINGAPORE EXCHANGE LIMITED (SGX:S68)
Singapore Exchange - NSE, SGX Working To Terminate Arbitration Proceedings
- Proposed Connect received regulatory dispensations; subject to further approvals from relevant local authorities.
- Singapore Exchange (SGX) and National Stock Exchange of India (NSE) working to terminate arbitration proceedings.
- Aiming for Connect to be operational by end-2020.
- Revenue sharing agreement under new Connect still in discussions; costs relating to set-up unlikely to be material.
What’s New
Proposed Connect received regulatory dispensations; subject to further approvals from relevant local authorities.
- SINGAPORE EXCHANGE LIMITED (SGX:S68) and National Stock Exchange of India (NSE) have obtained support from regulators on the joint Connect model proposal that was submitted, subject to further approvals from relevant local authorities.
- At the same time, Singapore Exchange and NSE are working to terminate the arbitration proceedings underway since May-2018.
Aiming for Connect to be operational by end-2020.
- Under the Connect model, trades will be routed to Gujarat International Finance Tec-City (GIFT) and members will access GIFT through Singapore Exchange. At the same time, NSE will also connect its members to GIFT. Clearing will still be done by Singapore Exchange.
- With the new set up, both exchanges aim to create a larger pool of liquidity by amalgamating both onshore and offshore liquidity. According to the exchanges, they are working with key stakeholders to operationalise the NSE IFSC-Singapore Exchange Connect by end-2020 as operational details have yet to be finalised.
Revenue sharing agreement under new Connect still in discussions; costs relating to set up unlikely to be material.
- Currently, trading and clearing of Nifty products are done on the Singapore Exchange, with Singapore Exchange paying licensing and processing fees to NSE.
- We understand that discussions in relation to the revenue sharing agreement under the new Connect model are still ongoing and that costs relating to the new set-up is unlikely to be large. FY20F operating expenses likely to be within Singapore Exchange’s guidance of S$465-475m.
Our thoughts
Maintain BUY, Target Price S$8.30.
- We believe Singapore Exchange's derivatives volumes will continue to benefit from ongoing market volatility and that the market has largely priced in an amicable resolution between the two exchanges in recent months, since the submission of proposal to the two regulators on the implementation of a joint Connect.
- We will monitor details in relation to the new revenue sharing agreement and believe both exchanges will be able to find a mutually acceptable middle ground.
Rui Wen LIM
DBS Group Research
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https://www.dbsvickers.com/
2019-08-07
SGX Stock
Analyst Report
8.300
SAME
8.300
