Singapore Exchange Limited (S68.SI) Earnings Call Transcript & Summary

Okay. Good evening, ladies and gentlemen. Welcome to the SGX First Half FY 2021 Results Briefing. The agenda for this evening will be as follows: first, a presentation of our financial highlights and performance by Ng Yao Loong, our CFO; this will be followed by a business update by our CEO, Loh Boon Chye; and finally, we'll end off with a question-and-answer session with the panel comprising senior executives from SGX. For those of you who are viewing this briefing through webcast, you may change the resolution of the broadcast to a higher setting if the images are not clear. The settings can be found at the bottom right of your webcast window. So without further delay, let me now invite Yao Loong to deliver our financial highlights. Yao Loong, please?

Very good. Thank you for taking the time to attend our FY '21 first half results briefing. Before I begin, I would like to highlight that from this half, SGX will publish additional financial measures to help our investors better understand the performance of our underlying business. This disclosure is in addition to the usual financials report. We will publish 2 financial measures: adjusted EBITDA and adjusted net profit after tax. The adjustments exclude items that have less bearing on our underlying performance. We will also provide reconciliation details between the adjusted and the equivalent measures. I will explain this in a later slide. SGX delivered a solid first half FY '21 financial performance in an uncertain environment. Revenue increased 9% to $521 million against a year ago; adjusted EBITDA up 7% to $321 million; and adjusted net profit up 7% to $228 million, equivalent to an adjusted EPS of $0.213. In terms of operating performance, equity derivatives volumes increased 4% to 93 million contracts. Traded value for cash equities rose 19% to $162 billion. Volumes for our Currencies and Commodities business was lower by 2% to 24 million contracts. The Board of Directors has declared a quarterly interim dividend of $0.08. This will bring total dividend payable for the first half of $0.16 per share. This slide illustrates the variance between our adjusted and reported financial measures on a year-on-year basis. The reported numbers are in blue, and adjusted ones are in green. First, there are no adjustments to revenue. And second, for total expenses and EBITDA, the amount for adjusted and reported measures do not show significant variance for the reporting periods. And third, the larger variance comes in adjusted net profit. Adjusted net profit in the first half FY '21 was $228 million, lower than first half FY '21 net profit, which came in at $240 million. And this means that our adjusted net profit growth was 7% year-on-year basis, with reported net profit growth higher at 12% if adjustments were not met. We saw revenue growth in our 3 business units. FICC, up 17%; Equities, up 3%; and DCI, up 35%. And as a result of our investments, FICC and DCI contributed almost 80% of the revenue growth of $42 million. By first half revenue contribution, FICC and DCI made up 33%, up from 29% a year ago. Our recently acquired subsidiaries, Scientific Beta and BidFX, contributed $34 million or 6% of total group revenues. Average fee per contract for Equity, Currency and Commodity derivatives was lower at $1.27 per contract compared to $1.34 a year ago. This was mainly due to a change in mix of products and our introductory fee for the new FTSE Asia expansion suite. Now let me provide more details on the year-on-year change. FICC recorded revenue of $99 million, up 17% from a year ago. Revenue from trading and clearing increased 36% to $71 million, or 6%, excluding BidFX. Treasury and other revenue declined 18% to $21 million, largely because of lower yield from the low interest rates. Revenues for our Equities business increased 3% to $351 million, accounting for about 2/3 of total revenue. Cash equities revenue rose 14% to $201 million mainly due to higher trading and clearing revenue. Total traded value increased 19% to $162 billion. Our average clearing fee came in at 2.71 basis points compared to 2.63 basis points a year ago. Equity derivatives revenue was lower by 9% to $150 million. This was mainly due to lower treasury and other revenue, which declined 19% to $39 million. Equity derivative volumes increased 4% to 93 million contracts led by higher activity in our FTSE China A50, Nifty 50 and MSCI Singapore Index futures contracts. DCI recorded revenues of $71 million, an increase of 35%. The increase was mainly from Scientific Beta, excluding which, revenue would have been -- would have grown 3% to $54 million. You may be aware that we have started to simplify our equity derivative fee structure by progressively bundling our clearing and licensing fees into a single clearing fee. In other words, instead of having separate fees, we would have a single fee. This benefits the customer as they view fees on an overall or [ ongoing ] basis instead of its individual parts. And this practice of bundling fees is in line with that of other exchanges. We have therefore made a way -- a change to the way we classify our license fees for equity derivatives' P&L. This will facilitate investors and analysts to make comparisons across time periods. We have combined license fee revenue with trading and clearing revenue. There's no impact on the overall revenue of equity derivatives for the group. This is just a reclassification. And because of this reclassification, the derivatives average fee per contract would also include license fees. As you can see from the chart, the bundled average fee per contract is about 12% to 16% higher than the unbundled fee over the last 3 financial years. And for the benefit of investors and analysts, we have updated our website to reflect a pro forma bundled quarterly and full year average fee per contract for the past 3 financial years. The average fee per contract of $1.27 and $1.34 shown earlier includes the license fee. Our total expenses increased 11% from $224 million to $248 million driven by the consolidation of Scientific Beta and BidFX. Excluding these 2 subsidiaries, total expenses would have declined $7 million or 3% to $218 million. Staff costs increased 10% to $110 million mainly due to an increase in headcount, including that of Scientific Beta and BidFX. Average headcount grew 16% to 968, which included 120 staff from the 2 subsidiaries. Processing and royalties increased 22% to $30 million, in line with the higher derivatives volumes. Depreciation and amortization increased 12% to $49 million mainly due to the consolidation of depreciation and amortization relating to Scientific Beta and BidFX. This was partially offset by lower premises-related depreciation. On an adjusted basis, total expenses increased 9% to $224 million from $222 million a year ago. This excludes amortization of purchased intangibles and other one-off items. Let me reiterate that intent of presenting an additional set of financial measures is to provide investors with a greater understanding of the factors driving our underlying performance and highlight trends in our business that may not otherwise be apparent when relying solely on reported measures. Our adjustments are limited to one-off gains and losses on long-term investments, certain noncash items that arise from business combinations and infrequent expenses. Such items have less bearing on our underlying performance in an adjusted, facilitate period-to-period comparison. The adjusted measures are also used internally to guide financial and investment decision-making. To provide transparency on the adjustments, we have provided reconciliation details between the adjusted and the equivalent measures in our financial results. We cover both EBITDA and net profit. We cover first half FY '21 and the comparative period a year ago. And you will notice from this simplified table that after excluding the item system, our first half net profit of $240 million reduces to $228 million on an adjusted basis. The $12 million difference is largely due to the exclusion of one-off nonoperating gains, amortization of purchased intangibles and acquisition-related expenses. This nonoperating gain relates to the gain associated with the remeasurement of our initial stake in BidFX to fair value when we acquired the remaining 80% stake in early July 2020. The practice of reporting additional financial measures is [indiscernible]. U.S. exchanges and several SGX-listed companies published adjusted measures. And we also noted that a few analysts made one-off adjustments to our reported figures in their reports on SGX after our FY '20 full year results. I believe the additional information that we are providing would be helpful as you think about the underlying earnings of SGX. In summary, our financial indicators reflect the underlying strength of our business. In a period of uncertainty, we have grown our revenue by 5 -- 9% and maintained our margins. You will see that adjusted EBITDA and adjusted net profit margins are at 62% and 44%, respectively. Our cash flow continues to be robust, with operating cash flow at $0.231 per share. Our balance sheet remains strong, which gives us the capacity to invest and grow. We have low gross debt-to-EBITDA ratio of less than 1x and very healthy interest coverage ratios. As mentioned earlier, the Board of Directors has declared an interim quarterly dividend of $0.08 per share. This brings dividends in first half FY '21 to $0.16 per share or 7% higher year-on-year. And let me now hand over to Boon Chye, who will deliver our business update.

Thank you, Yao Loong, and good evening, everyone. Thank you for joining our first half FY '21 results briefing. As you heard from our Chief Financial Officer, we recorded a solid performance in the first half of FY '21. We achieved revenue growth in all 3 business segments in an uncertain global environment. In Equities, which comprises our cash equities and derivatives equity businesses, it contributed 67%, with a year-on-year growth of 3%. In Fixed Income, Currencies and Commodities, or FICC; and our Data, Connectivity and Index business, or DCI, it collectively accounted for 33% of the revenue, up from 28% in FY '20. Of this, FICC contributed 19% of the total revenue, with year-on-year growth of 17%; and DCI contributed 14%, with year-on-year growth of 35%. This demonstrates the results of our continued efforts to broaden our product and services offerings. Most notably, we deepened our partnership with FTSE Russell with a long-term strategic partnership agreement across asset classes. The partnership has early success as we switched liquidity to the FTSE Taiwan futures contract. It is among our most successful product launches, drawing on the support of our network and the strength of our ecosystem, an ecosystem of partnership, credibility and trust. I will share more later on. Let me now move on to our respective business lines. Starting with FICC and Fixed Income. There was more than 350 new bonds that were listed in the first half of FY '21, with an issuance amount of SGD 170 billion. Bond listings revenue is up 4% year-over-year to SGD 5.1 million. We added 2 key partnerships in the first half of FY '21. First, we signed an MOU with China Central Depository & Clearing, a central securities depository for Chinese government bonds, in a wide-ranging agreement to strengthen and promote Singapore and China's bond markets. We are honored to be the first international exchange to do so. As you know, China's bond market is the second largest globally, and we're committed to continue to promote the internationalization of China's bond market and provide Chinese bond products and services internationally. Second, SGX has entered into a partnership agreement with NASDAQ to be the exclusive partner in Asia for NASDAQ's sustainable bond network initiative. We plan to enhance data access and transparency of sustainable bonds in Asia Pacific by bringing regional issuers onto the network. This would further our position as a top 5 international green and sustainable bonds venue. Next, on Currencies. Market conditions led to an overall smaller market for FX in the first half of FY '21 and, therefore, lower overall market volumes. CNY was the best-performing Asian currencies in 2020, and the strong appreciation of CNY led to reduced hedging needs by commodity importers. COVID-19 affected overall Indian rupee currency trading as trading hours will reduce from April to November 2020. Amidst these conditions, market share for SGX Indian rupee futures contract increased 10 percentage points to 65%, while the CNH futures contract market share was comparable. We continue to deepen and broaden our FX offerings. Adding to the larger Taiwan dollar contract that we launched in the second half of FY '20, we launched the Korean won and Singapore dollar contracts with larger notional sizes in first half FY '21. The contracts provide international investors with more efficient hedging and trading instruments. We also listed a new U.S. dollar iron ore futures contract whose quotation format and expiry date based on IM mandates are better aligned with trading of nonderivative forwards in the OTC market. Moving to Commodities. Iron ore volume increased 3% year-on-year to over 10 million contracts, while rubber futures volume increased 4% year-over-year to 891,000 contracts. Despite weakened exports and trade activity, our freight derivatives volume grew 14% year-on-year as our market share grew. We're also expanding collaboration in the commodity space. We plan to add to our suite our ferrous products in the coming months. We have also announced that we're exploring a global dairy derivatives partnership with the New Zealand Exchange to grow the dairy derivatives market by harnessing New Zealand's Exchange dairy product expertise while leveraging SGX's global market connectivity and distribution. Moving on to Equities and starting with equity derivatives. Our equity derivatives' trading volume was up 4% year-on-year. Volumes in the FTSE A50 and Nifty 50 increased by 20% and 17% year-on-year, respectively. We launched more than 20 contracts in the first half of FY '21 as we refresh and grow our equity derivative suite. I'll share more in the next slide. Amongst others, we're adding contracts that meet evolving global investor demand. Earlier in August, we launched Asia's first international real estate investment trust futures based on indices tracking diverse REITs listed in Singapore, Hong Kong, Malaysia and Thailand. Next Monday, we'll be launching 4 ESG-focused futures contracts in partnership with FTSE Russell. This risk management tools will help facilitate ESG integration into investment strategies and provide a hedging instrument for ESG tracking investments. Let me now share more about how we transform and transition into a long-term strategic partnership with FTSE Russell. In first half FY '21, we launched more than 20 contracts on FTSE Russell indices, and our product shelf continue to cover more than 95% of Asia by GDP. Of this, the SGX FTSE Emerging Market and SGX FTSE China H50 Price Return futures will be made available on the Mutual Offset System with the CME Group in the third quarter of FY '21. The aggregate volume of our major Taiwan contracts increased 9% year-on-year, and this can be attributed to how we have transitioned liquidity to the FTSE Taiwan futures contract. In end October, we facilitated a final liquidity switch, moving more than USD 1 billion of open interest effectively and seamlessly for our clients ahead of the U.S. presidential elections. I must say this is the first foreign exchange anywhere globally. The offshore open interest and volume market share of the SGX FTSE Taiwan futures stood at over 80% and 90%, respectively. This was our fastest buildup of liquidity of any contracts. We also successfully facilitated another liquidity switch to the FTSE Indonesian futures contract in December. The success of these liquidity switches is a strong testament to our strengths, namely, first, the trust that we've built with our customers; two, the value that our multi-asset offering brings to our customer; and three, the significant benefits the SGX ecosystem offers to the investment community. To accelerate adoption for the new SGX FTSE Asia expansion suite, we have offered introductory fees. This has an impact on our derivatives average clearing fee per contract. However, we expect our average fee per contract to improve as our FTSE Taiwan and new contracts run in over the next 2 quarters. Moving to the cash equities listing. We welcome 5 new listings, including secondary fundraising. Total funds raised were SGD 7.2 billion. We welcome companies from a wide range of sectors, and the new listings have attracted strong investor interest. Nanofilm, a deep tech unicorn, was 31x oversubscribed, and its market capitalization has grew by almost 2x from the SGD 1.7 billion at IPO. Credit Bureau Asia Limited, which provides credit and risk information solutions; and G.H.Y Culture & Media Holding, which is an entertainment business focused on the production and promotion of dramas, films and concerts in the Asia Pacific region, were 61x and 16x oversubscribed, respectively. As global economies return to a path of recovery and the economic environment becomes more certain, we look forward to more companies coming to the market. Moving on to cash equities, trading and clearing. Total value traded increased 19% year-on-year to SGD 162 billion in the first half of FY '21. Trading activity rose amidst news of positive development of COVID-19 vaccines, and investors repositioned their portfolios following the U.S. elections. There is a wider spread of participation as retail investors increase their trading activity substantially. The daily average trading value of ETFs listed on SGX more than doubled year-on-year, and we're continuing the momentum with new ETF launches. Four new ETFs were added, covering different asset classes and teams, offering greater diversity and low-cost trading options for investors. With the launch of the ICBC CSOP FTSE Chinese Government Bond ETF and the NikkoAM-ICBCSG China Bond ETF, SGX is now one of Asia's largest offshore trading venues for Chinese fixed income ETFs. We have also added the Phillip SGD Money Market ETF, which is the only money market ETF in Southeast Asia; and the Lion-OCBC Securities Hang Seng TECH ETF, which provides investors affordable access to Asia's largest technology companies. These ETFs garnered significant assets under management at launch and have continued to grow. In the Data, Connectivity & Indices business, revenue grew 35% year-on-year. Revenue for Market Data and Indices was SGD 40 million, up 85% year-on-year. Connectivity revenue was comparable year-on-year at SGD 31 million. A product that we are excited about is Scientific Beta's Smart Green offering, and that's targeted for the third quarter of this financial year. Beyond its recognized research pedigree in smart factor investing, Scientific Beta also has a strong track record in ESG and climate index design. Currently, all Scientific Beta indices have advanced ESG and climate risk reporting, and more than 30% of the assets under replication already has ESG options. Scientific Beta will be launching an innovative climate impact index that ensures consistency between carbon reduction objectives and component rates. This will avoid outcomes, for example, where stocks' carbon intensity deteriorate, but instead have its weight increased. We look forward to supporting international investors as they shift towards responsible investing that aligns to Paris Agreement climate change goals. Let me conclude by looking ahead and sharing the key aspects of what would shape our operating environment. In the near term, COVID-19 will continue to dominate the headlines. Global economies are expected to be on track for recovery with the increased distribution and accessibility of COVID-19 vaccines. We, therefore, anticipate continued growth in investment into cash equities, together with a potential increase in portfolio risk management activities, due to the shifts in U.S. policies under a new administration. Having established ourselves as a multi-asset exchange, we'll continue to drive growth through strategic partnerships, client acquisitions and new product offerings. We expect the medium-term revenue contribution of our newly acquired subsidiaries, Scientific Beta and BidFX, to grow beyond their current 6% as they tap on an enlarged network of resources within the SGX Group to execute on their growth plans. We have also announced today they were entered into a joint venture with Temasek to build a digital asset infrastructure, focus on capital markets' workflows, which is set to be Asia Pacific's first exchange-led digital asset venture. We are also alert to new investor demands of which ESG is foremost. We launched the SGX Future in reshaping sustainability together, our first, a platform to drive sustainable practices in our financial ecosystem. We'll continue to deepen our product and services offerings in this growing area of finance. Lastly, we expect our total expenses to remain between SGD 535 million to SGD 545 million and capital expenditure to be between SGD 55 million to SGD 60 million. So lots to look forward to across the different SGX businesses. And with that, thank you for joining, and I'll conclude my presentation and invite my colleagues to join me for the Q&A. Thank you for your attention.

Thank you, Boon Chye. So ladies and gentlemen, we will be commencing the question-and-answer session shortly. [Operator Instructions] So can we invite the first question, please? So we have the first question from Gurpreet from Goldman Sachs.

So I had 2 questions, very simple. First is, you talk about the Taiwan contract pricing coming back up. So can you please elaborate as to how you're looking to get the pricing back up or what horizon we should look at the pricing improving to normal? And will it go to a very normal level, whatever you understand as normal, over the coming quarters? And then the second one has to do with the restatement and one-offs. If I can please understand the $16 million -- and pardon me if I didn't pay attention, the $16 million gain from long-term investments, what that was about.

Sure. I will have my colleague, Mike, maybe take the question around the FTSE Taiwan futures contract, and then Yao Loong can take the second one.

Gurpreet, thanks for the question. Clearly, there's a level of scrutiny because a few factors were packed in. And you will know that within the reported half, there was a flurry of activity. There was clearly liquidation, there was rebalancing, running of parallel products, and there was a market-wide fee holiday on the introductory products, which is no longer in place. So I would say that the glide path that we are in the next 2 quarters and probably slightly beyond, it's dynamic. We are reasonably comfortable in saying that there's nothing in the economic structure of the equity derivatives portfolio that leads to lower economics or fee per lot in the steady state. Okay, there may be some pluses and minuses due to customer mix and product mix. But as a portfolio for equity derivatives, there's nothing in that economic structure that will lead in the steady state to lower economics, lower fee per lot.

Yao Loong, on the $16 million gain from long-term investments?

Yes. So Gurpreet, we initially bought a 21% stake in BidFX. And when we bought the remaining 80% as part of the exercise in terms of [ incoming ] the value, when we do the purchase price allocation, of which actually the details are in [indiscernible], we revalue our 20% stake to a value of 47.8%, and that's the fair value. And then -- but that is subsequently calculated. We used the purchase price to calculate the goodwill and intangible assets. And that revaluation of about $16 million, $17 million is the write-up of the 20% stake from the carrying value to the fair value when we did the acquisition of the remaining 80%. But I think the intent of our adjustments is to show that this was a one-off gain. I would say that this is an accounting gain. And then in order to reflect the underlying trends of our net profit, we have adjusted it out.

Okay. Thank you. There's a question that came in from Aakash from UBS. He'd like to know our views on the crypto exchange partnership with DBS. What trends do you anticipate in the future? And what is the fee structure like?

So maybe the high-level parameters for this DBS digital exchange and why we're involved, we have a 10% stake. I think the first thing that we're comfortable with is that SGX is able to contribute quite significant value to the operations, the design, the rollout of this marketplace. The second thing is that there are unique strengths within the franchise of DBS that make this a fairly unique offering. One is obviously the ability at the origination side of the house. They are a significant bank, significant credit and equity relationships with partners from across the world. The second one is they have significant strengths in distribution. They are one of the most powerful consumer and private wealth players in the market. And it is not just a crypto exchange. The intention, the ambition is for digital asset workflows and organization to be applied to new forms of assets. One of the clearest areas of potential value creation between us both is that DBS is a custodian for all these digital assets. And we think that the increasing normalization, and you've seen this in the U.S. and elsewhere, of having financial institutions be legitimized as custodians with sound AML/KYC of digital assets, that is a very powerful link to the business that we operate, which is creation of securities and derivatives on new asset classes.

Thank you, Mike. The next question is from Jayden from Macquarie. Can we unmute Jayden, please?

So maybe just a follow-up, firstly, on the transition to FTSE, and the comments earlier about the sort of glide path to a steady state, what about the non-Taiwan contract? I think Boon Chye mentioned about Indonesia being transitioned as well. Is there going to be any impact from the non-Taiwan contracts as they moved across? That's my first question. And my second question is just on the FX side of the business. Can I clarify what the market share is in CNH? I think there was some comments in the presentation about the market share in INR. And then is there any plans to launch additional currency payers now that we do have good FX as part of SGX? What would be the development path going forward to move beyond just the 2? Those are my questions.

So [indiscernible] Yao Loong answer the FX part first, and then we can talk a bit more about the equity derivatives.

Yes. Yao Loong?

Yes. So on the FX part, I think Boon Chye mentioned [ 65.6% ] for India rupee and 82% for CNH. So that has been holding out, and we are gaining market share on India rupee.

So to the question on the movement of the shelf from MSCI to FTSE, I would say that it's not exactly like-for-like. There is a change in the shape of the portfolio of our suite versus what we had previously. And this reflects the fact that FTSE Russell, it's actually slightly larger than MSCI. FTSE Russell is a multi-asset index provider. So the first thing I would say is that we're actually doing more asset classes with FTSE. We are trying to do more in the -- in this low-yield environment in asset classes which start approaching. You could call them mezzanine or fixed income assets. So what do I mean by this? Well, Boon Chye alluded to this earlier, REITs. FTSE EPRA Nareit is the global benchmark for REITs, and we are launching both ETFs and derivatives on Pan-Asian REITs. And coming down the road will also be green REITS. So that's a massive expansion in what we're doing with FTSE versus what we did not have before. The second thing that we have done in ETF format initially is to take advantage of FTSE's leadership position in world government bond indexation. So this is the WGBI ETF, which is the world's largest pure Chinese government bond ETF. So these are new things versus the original shelf. The like-for-likes would be Taiwan and Indonesia. With Taiwan, we have something like a 90%, 95% volume share compared to what MSCI was previously. In Indonesia, it's almost fully migrated. The ones which we haven't brought across will be what you would call the MSCI net total return products. These are listed on ICE, listed on Eurex, listed in Hong Kong. I think you will be aware that, and this is public information, that Eurex had issued a circular in November indicating the price increase that they were passing on to the market, and they were very clear that this was an external increase. So I think that gives you some backdrop of why we felt that we might not want to go for those products like-for-like. I will give you a specific example where it has worked for us. Previously, we did not have Asia ex Japan listed. This is sort of like the north star benchmark for Asian investing because MSCI had licensed Asia ex Japan to Hong Kong Exchange. We listed -- because FTSE had that index as well, we listed the FTSE Asia ex Japan. And I'm pleased to report that 95% of the open interest that was listed on Hong Kong Exchange and MSCI Asia ex Japan, has, in fact, come to SGX on FTSE Asia ex Japan. I would further point out that Asia ex Japan is 80% North Asia, 50% China. So with this, I'm really trying to round back to Boon Chye's point, which is the successes on our shelves are mostly due to what the customer wants to use us for. They've chosen to use us for the liquid trading of Taiwan, Indonesia. They've chosen to use us for government bonds with FTSE. And they've also chosen to use the net total return for Asia ex Japan for Thailand and for Malaysia. The rest of the contracts, public data, again, have mostly moved to Eurex.

Beng Hong to complement on the FX contracts and new areas.

Yes. No, I think on the FX bid, I think it's one of the most exciting bid. I think this is the first half that we have BidFX joining the SGX family. And I think as we have said, I think, in the last call when we were talking about the previous year's financial, I think BidFX will enable us and equip us as an exchange to offer clients both access into OTC and futures, so that -- as an Asian gateway for all clients that's coming to the region, we can provide foreign exchange hedging and risk management in the format that's required by the client. And I think we are very happy and proud to report that I think we have seen very significant progress. I think since we have acquired BidFX, the volume on the BidFX has continued to grow very strongly, high double digits. And I think we are continuing to acquire client, thanks to I think the synergy that we have around the client coverage where -- I think on both sides of the cross-sell from SGX, given our broader client base, ability for us to bring onboard quality clients onto the smaller client footprint of BidFX and for us to actually go the other way where we leverage on BidFX deep understanding of client workflow to really embed new products futures and nonfutures product into the equation. So I think on the client parameter footprint, I think we have made a lot of progress. On the cross-sell part, I think we are already seeing very strong momentum, and we expect that BidFX continues to be a growth driver in that. And also I think something that I think Boon Chye briefly mentioned about the new large contract, I think, again, in the last call. I think there was an analyst that asked about Korean won and the rest of the currency. I think we are seeing better traction. We would say that, I think, having a large contract mix of product are more relevant to the larger player. So you're giving -- seeing more traction around Korean won, but more importantly, in Sing where we have around 4x the [ DAV ], which is a good sign in that. And I think in terms of product, lastly, I think FlexC is a product that we have introduced in '19. Yes, we continue to see traction with new clearing member-enabled on the product. And definitely, I think the plan for us is, in the coming year, is to then fully enable FlexC futures and OTC in a consolidated manner for clients using the BidFX platform.

I mean I reiterate, I mean, the launch of the larger national sizes contracts in Sing dollars and Korean won and also the U.S. dollar INR quantum with higher mandates, those which will be useful for open trading in the NDF market. These are all also in response to customers' feedback on wanting larger sizes. So there's always a good thing when a customer provide the feedback on contracts that they would like to have and then reiterate a point that we have said many times before, bringing together in FX the 2 pools of liquidity, exchange-traded futures and the OTC liquidity, which now will come through with BidFX. So clearly, I would say we're very excited about the growth prospects.

All right. Thank you. We have a question from [ Marcus ] from CLSA.

I've got a follow-up question on the Taiwan contract again. Sorry to belabor this. But did the 15% drop Q-on-Q in the average fee per contract in the fourth quarter -- or sorry, your second quarter, seems quite high given that the MSCI Taiwan contract typically only is about 10%, 11% of your total volume. And given that MSCI Taiwan traded right up until October, just can you explain to us sort of like why that was a bigger drop-off in the fee per contracts? And maybe if you have the number, what would the fee per contracts have been absent the fee holiday? I've got a couple of other questions, but I'll ask them afterwards maybe.

Yes. Maybe let me answer that. Thank you for the question. I mean Mike provided a good backdrop to that. But what I'll say is as follows. Remember, in the period from July where we launched the FTSE Taiwan contract, obviously, we still have the MSCI Taiwan at that point in time, so you're transitioning or having 2 contracts at the same time. But more importantly, I wouldn't just focus on a 15% drop quarter-on-quarter. I think you probably have to focus on the open interest and the daily average trading volume as a consequence of our ability to retain that. And as I said, I might provide more context. I think in the quarters ahead, we will be in the overall scheme of things in a portfolio of various contracts. The fee will recover from here. So with so many things happening in the first half, in particular, as we transition, I wouldn't pay too much attention to a certain number quarter-on-quarter drop.

Okay. And I must congratulate you guys. I thought you did an excellent job in transitioning over to the new contract. I guess the follow-up question there is when the fee holidays get removed, is there a threat then that they return to the MSCI contract?

It's a great question. I think the only answer is we do all of this in consultation, in close consultation with our customers, right? So is there a threat? There is always a threat that the customer chooses not to do business with you. And the thing that really keeps us on our toes is to make sure we keep that customer needs, the ecosystem needs, the liquidity, the network effect at the foremost of our minds. And we are, therefore, comfortable in saying what I had said just now, which is in the steady state, which quarter to come, the coming quarters, there is nothing in the network structure or the economic structure of the equity derivatives portfolio that will lead to lower economics, all else being equal, right? So the threat is always there, but we're comfortable that the service we provide, the ecosystem we provide will retain our customers with us.

Got it. And then just a follow-up question maybe for Beng Hong. The -- on the CNH contract, you said the market share was 82%. Just wondering what that trend has been and whether you see any threat from the Hong Kong exchange mini contract that was announced yesterday or maybe the day before? Does that increase the competitive intensity on that contract? And what do you think the impact might be there?

It's actually quite interesting. I think if you recall like when Boon Chye was introducing, we are launching the bigger contracts. And Hong Kong is actually going the other way. And I would say that it's probably a reflection of the kind of market structure. They probably have a lot more retail clients that has about 10,000, 20,000 exposure. And I would say that -- and really, I think that is something that is very relevant for China market, for example. I would say that I think, for us, the market share actually has been relatively stable this year. But over the trend, I think, every year, we have been gaining market share. It just happens that I think from the client profile and client set, and you know R&D is a one-way street appreciation, so it's fantastic for our R&D bond ETF. But from a currency client perspective, I think the need for people to trade. All the active traders, all the financial traders, all the equity hedges, and the whole ecosystem, I think the need for them to trade is relatively less compared to previous period. So our volume has been staying -- I think the trend has been on the uptrend. This year has been relatively moving up and down around the 82%. Yes.

I mean maybe I could also add, look, we take any form of competition seriously. So on FX per se, it's not difficult to tweak specs of a contract and launch variation. I think FX futures contract can succeed or can succeed better if you have a multi-asset strategy. You don't just chase CNH on a stand-alone. You chase CNH with overall China envelope, iron ore that we offer. We now have a Chinese government bond ETF. Obviously, you got A50, and then across that, into obviously other currencies, other equity classes. And then on the Taiwan question, in terms of what's next going forward, again, I reiterate, we take all forms of competition seriously. It was exercise that we didn't acted on our own. In coming out with the FTSE contract, obviously, we work with FTSE, but we also listen to our customer. And the customer gave us a lot of input on what would be a contract that they think could have potential good adoption and success. So it's the ecosystems that came with it, so the design per se took into those considerations. So we hope that we withstand the competition that will come.