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Will Stronger Retail Investor Participation Help SGX’s Business?

managerSingapore Exchange (SGX: S68) has been focusing on ways to improve participation from the retail market (i.e. individual investors) and it seems that its efforts have been paying off in certain ways.

For the 12 months ended 30 June 2014, SGX had seen 68,000 new Central Depository (CDP) accounts added, bringing the total number to 1.6 million.

In fact, SGX’s out-reach programs such as MyGateway and SGX Academy are also bearing fruits. For instance, its MyGateway service had reached 187,600 subscribes as of end May 2014, an increase of 20% from a year ago.

Does all these matter to SGX?

However, is the higher awareness for share market investing amongst retail investors going to help reverse the downtrend of the company’s securities segment?

In the company’s latest quarter, the revenue from that segment had slid by 32.5% year-on-year and was in fact the main segment within the company that underperformed.

The primary reason for the drop in revenue was due to the huge drop in total traded value for the quarter. It might seem there is still much to do for SGX to drag the securities business back to growth mode.

On that front, SGX has just launched a programme for liquidity providers and market makers. It allows both parties to enjoy discounted fees in exchange for increased liquidity for the traded securities on SGX. Along with a number of other previously-announced initiatives – such as the introduction of a circuit breaker – SGX hopes to create a safer and more efficient environment for investors in the future.

Faster trading in Singapore?

SGX has started investing in its own technological capabilities so as to serve a special sector of clients; high frequency traders. According to The Edge Singapore, the company has actually gained such technology back in 2011. However, due to the possibility of stricter regulations on high frequency trading operations, it’s hard to say how it might indirectly affect SGX’s bid to attract such new clients.

Foolish Summary

The company has seen its share price fluctuate around the S$7.00 range since its failed merger with the Australia Stock Exchange back in 2011. Even at its current price of S$6.95, Singapore Exchange is still valued at 22.5 times its trailing earnings. For a company with falling earnings (profit for SGX in its latest quarter had fallen by 22.4% to S$75.8 million), it seems that the market is still expecting a strong turnaround from SGX in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.