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SGX revamps to drive growth in multiple asset classes

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The Singapore Exchange Centre in Shenton Way.

Singapore

SINGAPORE Exchange (SGX) on Thursday announced its biggest senior management reshuffle in recent years as the market operator looks to grow beyond its traditional equity business where competition has been keen, and drive growth in multiple asset classes.

The exchange will realign its business and client organisation to capitalise on its "strength as an international multi-asset exchange, to pursue growth opportunities and build scale in multiple asset classes".

SGX chief executive Loh Boon Chye said of this reshuffle, the second since he joined the exchange four years ago from Bank of America Merrill Lynch: "These changes will further SGX's future growth as a leading international exchange, fluent in multiple asset classes.

"We look forward to building new capabilities in growth areas, achieving scale and efficiency in established markets and enhancing customer-centric delivery of investment, risk management and capital formation solutions to the marketplace."

From July 1, four business units will report to him, namely, Fixed Income, Currencies and Commodities (FICC); Equities (Cash and Derivatives); Data, Connectivity and Indices (DCI) and Global Sales and Origination (GSO).

The FICC unit will be led by FICC products specialist and Deutsche Bank executive Lee Beng Hong, who joins SGX on Aug 1. In the interim, Mr Loh will oversee the unit.

SGX believes that the rising convergence of over-the-counter (OTC) and listed FX markets, coupled with its standing as Asia's fastest-growing and largest Asian FX Futures venue, presents it with opportunities to serve the market with innovative and differentiated products.

"Building on our leadership in Asian debt capital markets and growing traction of our bond trading business SGX Bond Pro, we are well placed to capture opportunities arising from the digitisation of the fixed income industry," SGX said.

Michael Syn, now head of Derivatives, will head the Equities business unit.

SGX's cash equities and equity derivatives businesses will merge to form this enlarged platform, where retail and institutional clients can access a range of equities products, including all trading, clearing, post-trade and research services.

"In an environment of abundant global liquidity, platform superiority will determine market participants' choice of trading and clearing venues," SGX said.

It intends to offer new derivatives products, structured products and offshore risk-management tools.

"By focusing on equities as a single asset class, product and service innovation can span both cash and derivatives channels to address client needs holistically," it added.

Ng Kin Yee will continue to lead DCI, while the current head of Equities and Fixed Income, Chew Sutat, will head GSO, which combines the equities and debt capital market teams with SGX's nine international offices and specialist sales teams.

SGX said: "This consolidation enables deeper international presence to facilitate capital-raising in key markets and creates an integrated client-facing group that will serve all segments with the full spectrum of SGX products and services across asset classes."

Separately, SGX president Muthukrishnan Ramaswami, 62, who has direct oversight of SGX's technology, operations, market data, connectivity and international coverage functions, will retire. He joined SGX on July 1, 2007.

Dennis Hong, managing director of OCBC Securities Private Limited (OSPL), welcomed the revamp.

"We look forward to initiatives by SGX which will have positive impact on market activity," he said.

Like most analysts, DBS analyst Lim Rui Wen believes the reorganisation will allow SGX to deepen its expertise in asset classes that it is looking to scale. "I think we can expect SGX to look towards accelerating the growth for the DCI and FICC businesses, and expect new acquisitions and partnerships formed down the road, on top of their existing efforts, such as in FX or index business.

"While no specific targets have been shared at this point in time, I think it is an interesting and forward-looking move to realign some of the businesses in what management views is the best way to capture growth opportunities, look beyond their existing stronghold in equities and equities derivatives."

CGS-CIMB analyst Ngoh Yi Sin said that the changes are growth-driven and that SGX will not incur significant costs.

"With the new FICC as a stand-alone segment, we think this will be the next key area of growth for SGX (in the form of new product offerings), complemented by its acquisitions and initiatives in recent years (BidFX, BondPro, Baltic)," she said.

S. Nallakaruppan, an investment specialist with a local brokerage firm, added: "We hope Michael Syn will have a fresh look at our moribund equities market and come up with viable plans to revive it."

Ms Ngoh said: "Based on how much derivatives volumes have grown and the innovative product launches, we think Michael has shown that he understands investor needs and the market well, and will rise to the challenge for cash equities business as well."

Leong Mun Wai, chief executive officer of Wintop Capital and a former managing director at two local brokerages, is concerned that the reshuffle falls short what is needed to boost Singapore's capital markets.

"The Monetary Authority of Singapore (MAS) and SGX have not given enough thought to the whole ecosystem to revive the capital markets. So I doubt these personnel changes would have much effect.

"The revival of Singapore's capital markets should become a national project."

Krishna Jyoti Guha, analyst at Jefferies Singapore, noted that currently equities (cash and derivatives) comprises the lion's share of SGX's revenue pie, and the sharpened focus can help SGX diversify and grow.

"With respect to initial public offers (IPOs), SGX continues to attract international listings. That said, it cannot escape global trends like companies staying private for a longer time, privatisation, among others."