Derivatives still key to growth even as SGX sees strong prospects from cash equities
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SGX said it has no plans to decouple its derivatives business from the equities banner under its multi-asset strategy.
ST PHOTO: AZMI ATHNI
SINGAPORE - After years of thin trading and a dearth of new listings, Singapore’s stock market has shown signs of a revival, with trading activity at multi-year highs and around 30 initial public offerings in the pipeline.
The rebound has renewed confidence in Singapore Exchange’s (SGX) cash equities business, which has lagged behind the equity derivatives business in terms of growth.
Despite cash equities now coming into its own, SGX said it has no plans to decouple its cash equities and derivatives businesses.
Under its equities division, SGX handles both cash equities – covering the listing, trading and post-trade services for shares, real estate investment trusts and exchange-traded funds – and equity derivatives, which includes futures and options linked to major benchmark indexes.
The cash equity business was rebranded as SGX Stock Exchange on Jan 5, following the completion of the Equities Market Review Group’s work to revive the Singapore stock market, which began in November 2024.
The move reinforced cash equities as a core pillar of SGX Group’s multi-asset platform and signalled confidence in further growth in cash equities, prompting questions over whether this could translate into greater operational focus or autonomy for the business.
Shares of SGX rose after the rebranding of the equities business on Jan 5,
Data released on Jan 9 showed that the total value of securities traded in December 2025 rose 29 per cent from a year earlier to $25.8 billion, with the average daily trading value up 23 per cent to about $1.2 billion. For the full calendar year, the daily average climbed 21 per cent to nearly $1.5 billion – the highest level since 2010.
The group added that retail participation in the cash equities market reached a four-year high, with volumes traded also increasing at close to 40 per cent year on year. SGX Group said retail investor interest saw a boost in part by the review group’s measures across demand, supply and regulation.
Notably, small- and mid-cap companies saw their trading turnover increase 42 per cent over the period, higher than the stock market’s overall turnover growth of 20 per cent.
Mr Daniel Koh, chief financial officer of SGX, said he is optimistic that interest in the stock market can be sustained as underlying fundamentals strengthen, more companies unlock shareholder value, and investor participation increases.
“We might be in the early stages of a virtuous cycle where there is more interest from both the retail and institutional investors, which in turn attracts more companies to list, reinforcing the cycle. And it’s not just the big names that people focus on like the banks, so that is what we are quite excited about,” he said.
Still, there are no plans to run both businesses separately despite the turnaround and strengthening prospects of the cash equities business, SGX said.
“Amid shifting global dynamics, our multi-asset offering is well-positioned to deliver growth through robust business drivers, supporting diversification and providing investors with access and tools to navigate an evolving landscape,” it said.
Equity derivatives, as well as fixed income, currencies and commodities (FICC), are the SGX group’s largest revenue contributors, making up 51.4 per cent of revenue, or around $667 million, in the year ended June 30, 2025. This is up 11.2 per cent from the previous financial year.
SGX said derivatives trading hit a record in calendar year 2025, with volumes rising 10 per cent to 329 million contracts amid strong institutional demand.
Derivatives trading across equities, foreign exchange and commodities rose 22 per cent year on year to 28.3 million contracts in 2025, while average daily volume increased 17 per cent to 1.3 million contracts in the same period.
Mr Koh said more Western investors are now participating in derivatives trading on SGX, with more than 20 per cent of trades occurring during the T+1 time zone, which is the overnight trading session covering Europe and US market trading hours.
He added that after Liberation Day in April 2025, interest in Asia from the West has amplified, with SGX well-positioned as a platform for investors seeking to hedge risks arising from geopolitical tensions between the US and Asia.
“We are, by far, the most prominent exchange when it comes to China access for overseas market participants across the globe. Investors want to go to a trusted exchange where they know that their money is safe and there is liquidity.”
Traded volume for the FTSE China A50 Index Futures rose 7 per cent year on year to 9.1 million contracts in December, lifting full-year volume to a record 112 million contracts. Trading in the China H50 Index Futures also rose to a record 1.7 million contracts for 2025, which SGX said highlights “the strengths of a single platform for both China A- and H-share risk management”.
To grow its derivatives business, SGX Group plans to expand its client base across different segments, regions and trading sessions, while deepening liquidity in its currency contracts and pursuing cross-selling opportunities.
The group launched its Bitcoin and Ethereum cryptocurrency futures in November, making it one of the first exchanges in the world to launch such a derivative. Twenty-year mini Japanese government bonds futures will also be available for trading on Jan 26, adding to its suite of Japan offerings. It cited its partnership with the Brazilian Stock Exchange to launch Brazilian real futures, established in June 2025, as an example of extending its listed foreign currency (FX) presence into emerging markets beyond Asia.
Its OTC (over-the-counter) FX trading platforms will see the integration of advanced data analytics and artificial intelligence, which SGX said would “deliver sharper insights and greater execution value”.
The group is also exploring ways to broaden its commodities product suite to help its clients manage bulk cargo and freight risks effectively.
Mr Shekhar Jaiswal, head of equity research at RHB Bank Singapore, said that SGX’s FICC derivatives volumes could reach parity with equity derivatives by financial year 2027 and exceed them subsequently thanks to continued product expansion and investor participation.
According to the bank’s forecast, revenue from equity derivatives could deliver a compound annual growth rate (CAGR) of 3.2 per cent from financial year 2025 to 2028, while FICC revenue could see a nearly 12 per cent rise in CAGR in the same period.
“Looking ahead, I expect FICC derivatives to keep compounding faster as SGX expands its FICC product suite and as demand for hedging-oriented instruments remains resilient in a more volatile and policy-fragmented macro environment, while equity derivatives growth appears comparatively more mature.”
He added that cash equities will still play an important role with ongoing initiatives to boost liquidity. SGX’s cash equities business could register a revenue CAGR of 9.2 per cent from financial year 2025 to 2028, he forecast.
