Good morning, ladies and gentlemen. Welcome to Singapore Exchange FY 2022 full year results. We're very pleased to be here this morning in person to deliver our results to you. Today's agenda will be as follows. We have the FY 2022 financial highlights and performance presented by our CFO, Ng Yao Loong, followed by a business update by our CEO, Loh Boon Chye. Without further ado, let me invite Yao Loong upstage to present the financial performance.
First of all, very good morning to the people physically in the auditorium and those online. Thanks for joining us as we take the chance to present our full year, the FY 2022 results. As a group, the revenue increased 4% or SGD 43 million to almost SGD 1.1 billion. Highest revenue since listing, and it's pretty broad-based, especially across our derivatives franchise, covering FX, commodities and equities. Treasury income or TI continues to be a drag in this financial year, and if we were to exclude TI, underlying growth will be up higher at 7%. On a headline basis, in terms of expenses, it was 7% year-on-year to SGD 562 million.
On a like-for-like basis, and what do I mean, if we exclude the impact from MaxxTrader, which we acquire in January 2022, and the credits from the one-off government Jobs Support Scheme in the earlier FY, total expenses would have only increased 3%. On an adjusted basis, which I think gives a better reflection of our ongoing underlying performance, earnings would have increased 2% to SGD 456 million. Now let me take you through the details of our performance. Broadly, derivatives trading and clearing revenue across our multi-asset platform and OTC FX were the two revenue growth drivers or the key ones. Business segment-wise, FICC grew 19%, driven mainly by currencies and commodities, and it now contributes 23% of our total group revenue, a three percentage point increase from the last FY.
Even if we exclude the revenue impact from the acquisition of MaxxTrader, FICC revenue would be still up a fairly robust 14%. In the medium term, I do expect FICC revenue to continue growing in the mid-teens % range as we execute on our growth plans. In the FX space, which comprises both the OTCFX and the exchange traded FX futures, the exchange traded currency volumes increased 10% from higher activity in our flagship contracts, which is the rupee and the CNH, and reflects our position as Asia's largest currency futures exchange. The acquisition of MaxxTrader has further scaled our currencies business. OTCFX now contributes 5% of total revenue, and I think this is a meaningful number.
ADV or average daily volume increased 64% to almost $71 billion, and we are on track to achieve $100 billion in the medium term. In commodities, we maintain our leadership position in the offshore iron ore market. Iron ore futures volumes were up 22%. Screen trading, which really measures the success in financialization, now contributes 29% of total iron ore volumes, an increase of 9 percentage points from a year ago. It’s not just about iron ore, freight derivatives also grew 32%. Moving on to equities. The 22% increase in equity derivatives trading and clearing revenue, I think reflects the value that market participants place on our platform, notwithstanding the competitive headwinds. If I just look at the last 5 years, equity derivatives revenue, and if we exclude TI, grew by almost 50%.
In FY 2022, we saw not only higher levels of activity, but also higher average fees in the year. DAV or daily average volume of our key contracts showed robust activity level. China A50 DAV grew 10%, Nifty 50 and MSCI Singapore DAV each grew 15% year-on-year. Our average fee per contract for the entire derivatives franchise increased 13% to SGD 151, and that's mainly due to the higher fees realized from our key A50 and Nifty futures. Revenue for cash equities was lower due to a decline in trading value and also the average fees. SDAV declined 5% to just under SGD 1.3 billion, primarily driven by lower trading activity in stocks in the small mid-cap segments. Trading activity in REIT stocks increased largely due to the reopening of our domestic economy.
Average clearing fee was 5% lower as we saw a higher participation rate from our market makers. Revenue from DCI was up 3%, mainly due to the higher subscription in data and co-location services. Treasury income. On a year-on-year basis, it declined SGD 25 million. That was really due to the lower net use. It has bottomed out following the start of the interest rate hike cycle by the major central banks earlier this year. Beyond the recovery of the interest rate environment, I think what is equally important is that we have been able to grow our derivatives business, which meant a higher collateral balance. So that is something that we can control and influence. Moving on, expenses. As I mentioned, it is 7% on a headline basis, but if you strip out the one-offs and MaxxTrader, it's actually 3%.
If I can bring the audience back to what we guided a year ago, and even the revision six months ago, the actual expenses of SGD 562 million was actually significantly lower than what we guided. I will add that the lower-than-anticipated expenses was also partially due to a slower pace of hiring in FY 2022, some of which will be carried over to the current financial year. Nonetheless, I would say the overall expense growth reflects our continued discipline in cost management, even in a cost inflationary environment. This is why you see that staff costs have largely remained comparable year-on-year after we exclude MaxxTrader, even as we made adjustments to our staff compensation in response to the market environment. Like many other financial institutions, whether in Singapore or globally, SGX is not immune to these pressures.
Technology costs were up 5%, primarily from our investments to enhance our OTC FX platform. Processing and royalties rose 10% or SGD 6 million. Not surprising, given the higher volumes across our key contracts. Other expenses increased 9% or SGD 5 million due to higher traveling as we recover from the COVID pandemic. There was also a write-off of assets that were no longer in use, and we made higher allowances as well. On an adjusted basis, expenses is 3% lower than the reported number. I think this again reflects better the underlying expenses. These are some of the adjustments that we made to remove the one-offs and the amortization of purchase intangibles. Margins-wise, at the group level, it was a decline of 1.5 percentage point. Two reasons, treasury income decline and a larger contribution from our subsidiaries. Let me just break it down.
First, at the core operating level, we have been able to maintain our margins at about 50%-58% year-on-year. The chart on the left shows the EBITDA margin of our core operating level, at the core operating level, and that excludes TI and the subsidiaries which were Scientific Beta and OTCFX. If you look at the middle chart, it gives you a sense of the magnitude of the TI in decline, which we are expecting to recover in FY 2023. The chart on the right, looking at the core expenses, which is really the derivatives and securities trading and clearing business. The expenses has largely remained unchanged over a two-year period. Second, our investments in growing new businesses, new business pillars like the OTCFX, have exerted a downward pressure.
These businesses, even at a mature stage, will not have EBITDA margins that are close to what we have at the core operating level. If you look at what some of our peers operate in those similar businesses, their margins, I guess you can see that they are not at where we are in terms of the core operating business as well. But what these subsidiaries or the growth pillars contribute financially to the group is a faster growth in revenue and operating profit. Just to give you a sense, our revenue contribution has increased to 8.5% of group revenue, compared to 7% a year ago. This percentage is expected to continue to rise. On a like-for-like basis for the subsidiaries, which is BidFX and Scientific Beta, I've stripped off things that were not present in FY 2021.
Margins were comparable at 37%. I think if I look ahead, clearly very mindful of the cost inflationary environment, but I do expect again margins to recover over time as we scale our businesses and also with the TI recovery. Leverage ratio, interest coverage ratio remains at, I would say, very healthy levels. On a dollar basis, the debt went up largely from a $250 million bond that we issued in September 2021, and the proceeds was used for investment purposes. We acquired MaxxTrader, which I've said quite a few times, and also invested in a closed-end fund, which has Trading Technologies as the underlying asset.
Raising external capital, whether it's in the form of convertible bonds or plain US dollar bonds, I think what's the advantage is that it has allow us to lock in a low funding cost at below 1%, and that's very helpful in a rising rate environment. This also shows our proactive approach towards capital management, such that we will have the financial flexibility to pursue growth opportunities across the cycle. The board of directors have proposed a final quarterly dividend of SGD 0.08 per share. This will be subject to approval at the upcoming AGM in October. If approved, the total dividend per share will be SGD 0.32 per share for the year. Operating cash flow and the adjusted earnings per share, as you can see, are more than adequate to cover the proposed dividend.
The earnings that is retained will be used to invest in growing our business. Looking ahead, FY 2023, total expenses on a headline basis, we expect it to grow 7%-9%. I think it's important again to look beyond the headline growth, and let me just break it down for you, and also the context of the increase. Excluding the full year impact of MaxxTrader, expenses are expected to grow 5%-7%. What do I mean, right? We acquired MaxxTrader in January 2021. There was six months of expenses. Now we will have to consolidate 12 months. Even if everything was unchanged, just by the fact that we consolidate additional 6 months would have meant a 2 percentage point increase in expenses.
After we adjust for this, our FY 2023 expenses are expected to increase 5%-7%, mainly due to higher staff costs because we're investing in our people and also to build out our OTC FX business. A proportion of the higher staff costs clearly will be due to salary adjustments, given the competitive market for talent and the environment that we operate in. There will also be some hiring that we carry forward from FY 2022. I do not expect these expenses to remain beyond FY 2023. I anticipate the overall pace of hiring for the entire group, including our subsidiaries, to slow down, and overall compensation levels or adjustments will normalize. In the medium term, our expense guidance remains unchanged at the mid-single-digit growth range.
The context that I wanted to give was, again, just look at it rather than a year on year, and perhaps look at it over a two-year period. As mentioned, if we exclude MaxxTrader and the one-offs, FY 2022 expense growth would have been 3%. What this chart shows is that we look at it over a two-year period. MaxxTrader acquisition, which is an important one, contributed 2 percentage points per annum to the growth. It's an inorganic acquisition, and it has added to the expense base. Clearly, this is investment for growth. As for the core, the remaining group, the expense growth is 4%-5%, 4-5 percentage points.
This shows the relative contribution, and I wanted to break it down for you to let you know where it is coming from, both on a organic and inorganic basis. CapEx for FY 2023 is going to be higher compared to the previous years, at about SGD 70-75 million as we scale our OTCFX platform. Clearly, as a critical information infrastructure, we will continue to upgrade our platform and system architecture, including investments in cybersecurity. We will also take the chance to improve the efficiency of our office premises as we plan to consolidate our real estate footprint. While the CapEx range that we have given for FY 2023 appears to be a significant increase over the past few years, I think it's important to view CapEx as a multiyear program across refresh cycles rather than a year-by-year increase or decline.
In the medium term, we do expect capital expenditure to remain at a similar level as we embark on the major system updates. You will see that over a 10-year historical trend, the average CapEx to revenue ratio is about 7%. There are years in which we will be below or above, depending on the CapEx to be done for that year. It's important to look at it across a cycle. The other point that I would like to point out is that the business the group has expanded in the last decade. Although the absolute amount has fluctuated between SGD 40 million-SGD 80 million per year, the group revenue has grown almost 1.7 times from FY 2012 to about SGD 1.1 billion in FY 2022.
With that, let me now hand over to Loh Boon Chye, who will deliver our business update.
A very good morning again, everyone, and thank you for joining us for this FY 2022 results briefing. As Ng Yao Loong has shared at the start, we achieved our highest revenue since listing. Let me now share how our global strengths drove the performance. First, our derivatives platform registered higher volumes, you heard it from Ng Yao Loong, but it's across all asset classes, equities, currencies, and commodities. In FY 2022, as global participants navigate uneven economic recovery as the pandemic evolves, geopolitical tensions rising, supply chain disruptions, inflationary pressures, rapid shift in interest rate policies, and recessionary risk. Our clients use more of our multi-asset platform as they seek open and neutral access to manage their portfolios.
There was also higher activity in the overnight or the T+1 session across all asset classes year-over-year, reflecting the global nature of our product suite. Let me go through the various asset classes. First, our equity derivatives product suite continues to provide unparalleled access to the largest economies in Asia, with more than $22 billion in notional value traded every day in FY 2022. In FTSE A50, there was increased buy-side participation and overall trading activity arising from the evolving pandemic outlook and developments in sectors such as technology and real estate. Likewise, trading volumes in the Nifty futures rose in response to the evolving macroeconomic conditions. Our listed Asian FX futures platform, which is the largest globally, provides price discovery and liquid access to the largest and fastest-growing economies in Asia.
Trading in our key contracts was robust, with total SGX FX futures DAV up 10% to 119,000 contracts, and total notional value for FY 2022 was up 23% to $1.8 trillion. There were a few single day trading volume records that was achieved for the CNH futures and INR futures. We also saw meaningful growth in FX block trades that are cleared with SGX as global participants seek increased efficiency and cost reduction driven by uncleared margin rule changes. We delivered strong results, too, in commodities as DAV increased 21% to over 118,000 contracts. Global participants continue to look to SGX commodities platform for risk management amidst supply disruptions, economic volatility, and shifting macroeconomic outlook.
Iron ore DAV was up 22% year-on-year to close to 100,000 contracts with good increase in screen trading volume. Screen trading now accounts for close to 30% of total volumes, compared to 20% in FY 2021. 30% was across the whole financial year. If we look at the last few months, the percentage is even much higher. Freight also had a strong year, with DAV up 32% year-on-year to 8,000 contracts. Our continued focus on building ecosystem together with key global strengths create reinforcing product adjacencies. Let me illustrate that through two themes. One, as you see on the screen, is the steel and related raw materials, and two, trade and transport. Iron ore, which is a key input to steel, provides a close proxy to macroeconomic growth.
Having pioneered iron ore derivatives, we have since created a comprehensive product ecosystem around the concept of a virtual steel mill and broadened our client network. The percentage increase in screen trading that I talk about has really come from a wider array of financial participants. In freight, which is another proxy that serves as a global economic barometer, and as the largest dry bulk freight venue, we provide deep liquidity for our customers in FFAs, which is complementary to our seaborne commodity products. As a leading exchange in freight derivatives, we are well-poised to expand into container and air freight. We will look to participate in the global energy transition with product launches in battery metals in the months ahead.
With increased liquidity in our commodity suite, such as iron ore, dairy, and freight contracts, they are now included in global commodity indices, which would attract more investors' participation. I shared about our SGX FTSE A50 and SGX Nifty performance in the previous slide. Building on that strength, we have built up a shelf of products covering the ASEAN capital markets of Singapore, Malaysia, Thailand, Indonesia, Vietnam, and Philippines. These ASEAN products have strong correlation with domestic indices, allowing investors broad access to growth economies efficiently across borders. The Regional Comprehensive Economic Partnership, RCEP, which came into effect this year, could drive greater trading relationships amongst Asian economies. Global participants can participate in the growth of ASEAN by accessing the respective markets through SGX single country indices or SGX Singapore single stock futures.
For example, companies in Singapore's benchmark indices have a strong regional footprint, and SGX single stock futures on these companies provide an efficient access instrument. Investors also have unique Asian time zone access to the fast-growing Asian technology sector through SGX single stock futures. FX is another global strength of SGX Group. We now have a sizable and scalable FX franchise comprising OTC FX futures, and an electronic communication network, ECN. OTC FX, as you heard from Ng Yao Loong, contributed 5% of group revenues and remain on track to achieve an average daily volume of $100 billion in the medium term, building on its platform and product offerings. Our clients can now connect to a combined liquidity pool of over 100 liquidity providers and market makers. They will be well-served by our global client coverage group that operates around the clock and extends across nine locations.
Clients will also see enhanced workflow and risk management solutions enabled by our strong technology capabilities, and we will continue to bring new product and platforms enhancement to address new client needs. Further product offerings in NDF will be added in the weeks ahead on our FX ECN. This will allow us to offer clients a seamless platform across FX Spot, swaps, options, NDFs, and futures. Amidst the shifting economic and market landscape, we see opportunities to continuously provide new investment products for our global participants. In FY 2022, we saw issuers raising SGD 1.9 billion, an 84% increase year-on-year. The capital markets initiative announced last September have increased momentum and pipeline for equity capital raising. However, as we are witnessing, market conditions needs to stabilize around valuation. This comes amidst concern over the continued rising interest rate globally and high inflation.
In recent months, we welcome the listing of NIO Inc., a premium smart electric vehicle maker, and Emperador Inc., a global spirits company on SGX main board. The consistent post-listing liquidity demonstrate SGX value as an alternative venue for global companies seeking access to new investors. Through our partnership with U.S. Exchanges, issuers can gain round-the-clock liquidity and a diverse pool of investors with an SGX listing. 2022 marks the twentieth-year anniversary of the establishment of S-REITs on SGX. The REIT market has grown in international profile, and to date, more than 80% of REITs and property trusts hold overseas assets. The ecosystem has continued to broaden and deepen with more listed products, including derivatives and ETFs with REITs underlying. SGX is now home to five REIT ETFs with assets under management close to SGD 900 million. Our ETF shelf is multi-asset.
In FY 2022, total assets under management were up more than 30% to SGD 12.5 billion. 7 new ETFs were listed in FY 2022, of which 3 were powered by Index Edge, SGX's own index business. The eventual launch of the Shenzhen Stock Exchange-SGX product link and Thailand Singapore Depository Receipt linkage will further complement our product shelf and connectivity. In FY 2022, we added our first catastrophe bonds, innovative asset-backed securities, and close to 120 green social sustainability and sustainability link bonds in 2022 to our broad and diverse fixed income listing platform. We will complement and enhance the fixed income issuance ecosystem through MarketNode, a digital market infrastructure. MarketNode provides a data-powered collaborative workflow tool for fixed income issuance, and further product expansion will be added in this current financial year, FY 2023.
This is in addition to the ESG bond information hub that has been introduced. Partnership is an important channel of broadening and deepening market access as we position ourselves to be the partner of choice for global access to Asia. There were several other collaborations with SGX Securities in listings. Our MOU with Nasdaq, and recently added, NSE, provides seamless pathways for companies that are keen to list in either or both markets as they expand their businesses globally and access global investors. We also enhanced our data distribution network in China to distribute SGX Securities data. Domestic issuers and investors now have expanded access to data for insights for SGX Securities products, including REITs and ETFs, to add to existing channel of market data distribution for our derivatives offering.
In commodities, we went live with the trading and clearing of New Zealand Exchange suite of dairy derivatives exclusively on SGX commodities. That happened in November 2021. Pleased to report that the mutual partnership saw open interest of the product and volume of several dairy products achieving record levels. In equity derivatives, the NSE IFSC-SGX Connect, or in short, the GIFT Connect, was launched by the Prime Minister of the Republic of India, Narendra Modi, in July. The GIFT Connect presents an innovative pathway for global investors to participate in India's growth story. These mutual partnerships, which combine the strengths of these partners, serve to provide clients with better access and connectivity, and we look forward to expanding our partnership arrangements. Our financial performance in FY22 reflects the value that investors place in SGX Group's multi-asset businesses.
Our derivatives platform registered higher volumes across all asset classes. Our OTC FX pillar, which mainly comprises BidFX and MaxxTrader, now contribute a meaningful 5% to the group revenue. We are maintaining our medium-term revenue growth expectation of a high single-digit % range, even though downside risks to the global economy have increased. We will capitalize on our global strengths to deepen our scale in FX and commodities, broaden our product range, and grow our client segment. Our fixed income, currency, and commodity segment is a key growth engine with an expectation of mid-teens % revenue growth in the medium term. We expect equity and bond listings to grow as our capital markets ecosystem deepens and Southeast Asian growth companies mature. We'll build on the momentum of our growing equity derivatives suite, scaling the business by increasing our customer base through our global distribution channels.
We'll also continue to expand and reinforce our equity derivatives product shelf. Looking forward on building what we have achieved collectively on FY 2022, and delivering importantly for our customers, shareholders, and stakeholders in FY 2023 and the years ahead. With that, I conclude my presentation, and invite my colleagues to join me for the Q&A. They don't screen the wrong person. Any questions from anyone? Yeah. After that, I guess Nick. Yeah.
Hi. Thank you. This is Jayden from Macquarie. Thanks a lot for the presentation and the opportunity. Just two questions. One of the areas that you didn't talk about strategically, Boon Chye , was Scientific Beta. If I look at the data and connectivity revenue, it looks like it grew quite modestly. What's the outlook for their contribution going forward? Do you see a lot of potential for that to sort of pick up, or should we sort of expect it to remain relatively steady? My second question is just around the dividend. I think it's been about 12 quarters or so we've had SGD 0.08 per share. There has been, you know, a record year revenue, as you said, and prospects do look good.
Just wondering, you know, when we should expect to see dividends increase, and what's the thinking around that? Thank you.
Thanks, Jayden. With regards to Scientific Beta, it really had provided the adjacency to our SGX Index Edge business. It had a steady performance, I would say, over the last two years as the pandemic had clearly slowed marketing efforts. They had a steady performance with the reopening that was seen in U.S. and in Europe, which is the key clients of the business. We're beginning to get back to marketing and engaging clients. We've put in place, in fact, to further expand the marketing and sales coverage. Over a medium-term outlook, we think the business will continue on this original track.
As regards to the dividend, as you've seen our track record, we've always steadily increased our dividend in line with sustainable performance. We are still investing for growth and we look towards rewarding our shareholders as our performance sustained at a higher level.
Maybe if I could just clarify. I think, Jayden, you kind of mentioned 12 quarters. I think, probably it's 8 quarters rather than 12. I just wanna clarify. I think the last time we raised was in Q4 FY 2020, so that's 2 years ago, and that was half a cent. I think clearly the other message I think we would like to get through is that we are looking at total shareholder return. Dividend income is clearly an important part of that, but earnings growth is also a key component of total shareholder return.
Sir, Nick Lord from Morgan Stanley. I just wonder if you could elaborate a little bit on that connectivity point that you had a slide on, and obviously recent announcements have been around the U.S. link-up and also the launch of the NSE IFSC. Can you talk a little bit more in terms of specifics? So for the NSE, GIFT link-up, I mean, what timing are we on in terms of product launches? What type of products do you think we're gonna see from that? Do we see sort of revenue share? I mean, I just want a little bit more detail on where we are on negotiations there. And then in terms of the U.S. tie-up, I just want to try and understand how you see that.
Is that more of a venue where U.S.-listed companies can get access to overnight trading their time on the SGX, or is this a way in which SGX-listed companies can get access to investor pools in the US?
I think on the GIFT Connect, Nick, the ability to now combine the two pools of liquidity into one eventually really helps to further enhance the liquidity. We clearly hope to look towards a one plus one being more than two and in that kind of scenario as the market grows. I think the commercial for both partners will grow in tandem. I think what is also important is we see that as a first step, because India, being the fifth largest economy globally today, will become probably the number three economy by size by 2030. That's clearly an important market where, based on our multi-asset platform, we want to look beyond just the Nifty futures.
On the connectivity with U.S. exchanges, I think it serves two folds. I mean, increasingly we're seeing, and I hope not any quicker pace in terms of de-globalization challenges to that. Being able to create that kind of linkage not only for investors but for companies that could be listed on two exchanges and accessing a wider pool of investors and round-the-clock liquidity, and it can work both ways for companies that are listed in the U.S. that may want to expand into this part of the world and for even regional companies in this part of the world, listing on SGX at the same time on a U.S. exchange.
Thanks very much. Just coming back to India, I mean, at the moment, it just incorporates the Nifty. Is that right? Or will it incorporate Indian Single Stock Futures as well?
So, um-
Nifty
To unpack this, the bedrock of the relationship, is settled. It is a partnership. The initial execution phase is about making sure that this novel infrastructure, which is the combining of the trading networks, but only an alignment of the clearing network, because that's always gonna be harder. The novel engineering is to make sure that the trading networks of India onshore, Indian participants, and SGX offshore, SGX participants, that gets merged. I would expect that for the next 6 to 12 months, the focus is on seeing that success in Nifty 50, which, after all, is the benchmark product. It is most likely to have this sort of elasticity to when you bring two pools together. It is entirely envisaged that as time goes on, and particularly as, participants demand more and more
Indian derivatives markets are still in the very early stage of expansion and growth, right? If you compare the complexity of products onshore, it still has a long way to go to fill even the product slots of what you see in the U.S. and China. What they do have is very high liquidity. This is a happy place to be. Focus on one product, make it big.
Would there be a margin decline on the Nifty future that's offset by volumes, or does the margin for you remain the same?
It's hard to really tell, but I think you can see from our realized results in the past year that Nifty is one of these products that when flight to quality occurs, volumes and margins improve. When equity risk premium's heading at 30%, nobody minds paying $1 per lot to an exchange or clearinghouse.
All right. Thanks very much.
Thank you. This is Mayuko from Nikkei. Can I just have an update on the battery material product launch? If I'm not wrong, it was planned to launch earlier, first half of 2022. Is there any issue on the launch? When is it going to be launched? In the mid- to long-term, what is the sort of market share that you want to achieve globally? Thank you.
On the EV metals, I think we are still going through the regulatory approval, engaging the market participant for the launch. We are very excited of the opportunity for us to complement our steel value chain by adding a new component, EV metals. We are really looking at two main category, cobalt and lithium. I would say that, you know, that will not be all that we do around greening the suite that we have. Something potentially in the pipeline really is looking at, you know, new greener commodities for us to launch. In the past we have launched, for example, the 65% iron ore. We have also launched the Low Sulfur Fuel Oil.
Really, I think, you know, the demand from the market and we are working actively with the participant to continue to grow the suite. Potentially, I think toward, you know, next year, something that we're thinking about is broader around the carbon offset. You might be aware that we have a joint venture that we have announced in February last year, Climate Impact X, which is a four-way JV between us, Temasek, DBS and Standard Chartered. Really, I think it's four partners coming together to try to create and channel capital to really come up with, you know, more capital into the nature-based carbon offset market.
Within that, I think you can expect that as Climate Impact X rolls out products, they have rolled out a marketplace, they have launched auction, you know, we will be working with them then to correspondingly launch carbon related futures to enable clients who want to channel capital into the market or hedge their carbon offset risk to also have the instrument to do that.
There's some questions.
Yes. If there's a question or several questions from Goldman Sachs. First one is, as we build our OTCFX business and other businesses, we heard earlier that EBITDA margins will be lower for the group. Perhaps you can elaborate how low do you expect it to be. That's the first question. The second question is, with the medium-term note issuance, what is your appetite for M&A, and which space are you looking at?
I'll just talk about margins, and I think useful for Beng Hong to also just give an illustration of the growth potential of the business. We have mentioned OTC FX now contributes about 5%. Revenue number is about $58 million. The maturity or when it's more stabilized, margins of the OTC FX is expected to be about 40%-45%. If you are able to look at how we scale the business, 70 billion ADV right now, going up to 100 billion ADV. Clearly, we are looking at quite a significant increase in the contribution. The relative contribution between the core and OTC FX will then determine the impact on the overall group EBITDA margins. Wouldn't want to sort of give a specific number at this stage.
Again, it depends on the relative growth of the business. What OTCFX brings to us is the additional revenue driver, and then also the faster operating profit growth that we can see as a group.
Yeah. To add to Yao Loong, I think if we take a step back and look at the FX market, while we are now $70 billion and one of the key player globally, if you then contextualize that to the total size of the market, it's a $7 trillion market. We think that there's about $2-$2.5 trillion of addressable market for the service that we provide. Clearly we are expecting, and Yao Loong has mentioned, as CEO has mentioned, a medium-term goal for us to hit $100 billion. I would say that $100 billion is just a start.
The happy problem for that is from a group perspective, as we continue to grow and scale and accelerate, the FX service that we provide, you know, we will continue to expect that there will be some impact on the overall margin of the group, but from a profitability standpoint, from a growth standpoint, I think it will be a positive contribution. The other part I guess from the FX vertical is that I think, you know, a big key themes that we have seen, it's really an increased demand across the board, across the industry, across the economy, around digitalization, automation. The services that we provide.
You know, will play very well into the ability for us to scale, to serve, and to service the ecosystem that we have. To add to that, the exciting part about extending the SGX franchise beyond just Asia. If you look at our FX franchise today, to what Loh Boon Chye has mentioned, we are available in the three main data centers. We have round-the-clock services. We have big client segments that is using our service globally 24, 5 and half. I would say that from the different angle, that one, it's a massive market. We are just starting. We are expecting massive opportunity and demand for the service, and we are looking at ways to better serve that demand.
I think the second questions were around appetite for M&A, and which area are we looking at. If you look at it in the last three years, the multi-asset platform is really coming together. We are clearly focused on execution. That said, as I commented in my remarks, we want to invest for growth. I think there are clearly opportunities out there. While I talk about the market valuation gap has to narrow, I think in the market conditions like that, probably you can see more opportunities. If you can add to some of the global strengths that we're building up, whether that is in commodities, and it doesn't necessarily need to be in trading platforms.
You heard us talk about ecosystem building. If we can extend the ecosystem in commodities, you can extend the ecosystem in FX. That's clearly what we'll look at. You heard me talk about partnerships. We had a investment in a trading technology together with Cboe, that helped us to really gain growth too, through the investments as markets grow and the participants increases, and the investments will clearly lead us to potentially more client acquisition or more partnerships. Capital markets technology is potentially another area that we'll look at. I think more importantly, in market conditions like that, you may be able to seek out better opportunities. Any other question?
Thank you. Hi, morning. I'm Jovi from The Edge Singapore. I have two questions. They're both about listings. The first one is I note an FT story that SGX is in talks with Grab and Sea to consider Singapore, perhaps for a dual listing. Can SGX confirm efforts to convince this, Singapore-headquartered companies that are currently listed elsewhere? The second question I have is some brokerages here have expressed interest in revitalizing S-chips. What is SGX's view on this? Thank you.
Sorry. Could you repeat the first-
Yeah. It's a bit.
the first question?
Can you slow down a little bit?
The first one is about an FT story that says SGX is in talks with Grab and Sea to convince them to consider Singapore for dual listing. Can SGX confirm if it is in talks or the efforts to convince these companies to consider Singapore?
Well, we wouldn't clearly comment on the specific companies. If you look at in the recent months, having NIO being listed here, having Ant Group being listed here, clearly the platform does create value for companies that they see. Companies will have to make the necessary choices. I think SGX, as I said, round-the-clock liquidity, exchange partnership, and access into this part of the world does clearly gives the value proposition for companies.
Mm-hmm.
Yeah, I mean, clearly, you know, we're excited about the secondary listings that we've attracted in the last couple of months with NIO and Ant Group. They've, of course, lifted the momentum around some of these discussions. You know, everybody looks at this from an issuer perspective with different objectives. The considerations for both Chinese issuers as well as issuers from other parts of the world, particularly Southeast Asia, Singapore itself, remains strong in our view.
Do you have a second question, I think?
Yeah. S-chips.
I didn't hear the question. What was it?
S-chips.
S-chips.
Chinese companies.
I would say on the Chinese issuers, again, this is also driven by the momentum post the NIO listing, clearly a strong pickup in discussions around that. We all know that Chinese ADRs continue to consider their options, depending on where the U.S. regulatory and political pressures are headed. Our focus is on those issuers that continue to value overseas listings, for example, because they have overseas presence or ambitions, and that's where a Singapore secondary listing can add value for these issuers.
You know, we're really focused on what is within our control, and that's really to make sure that we're, you know, considered as the right venue for these type of players that is offering global and regional incremental investor access for Chinese issuers. That is prominence through a listing in Singapore on an international level that helps if they think about expanding their profile and their business in Asia or beyond.
It's, of course, also making sure that our processes are as efficient as possible to cater to these issuers. That's where I, you know, believe that we've made a lot of progress.
Maybe, Jovi, just to touch on real brass tacks, right? Things we do. We exist as the market infrastructure, national market infrastructure of Singapore, and Singapore stack serves issuers and investors. Some of these examples that Pol was referring to, for instance, two large components of MSCI Singapore, Grab and Sea, or NIO, which is listed, and Emperador is listed. They each find value for themselves in using our option platform. An example of, say, specifically Grab and Sea, they get evening liquidity from our derivatives. No other derivatives market. MSCI Singapore, they get evening liquidity from our derivatives because we are the home of MSCI Singapore futures, and we trade the longest trading hours in Asia, 22 by five.
We have listed single stock derivatives to allow risk managers in the Asian time zone, before the U.S. open, to transfer risk in a safe way, in a practiced way, when they want to exchange risk on, say, those names. The value proposition that they would need to find for themselves, the examples of NIO and Emperador have already shown this, is how do I, as a listed company, serve my issuer base better, expand my capital markets efficiency better by using the market infrastructure of choice? There is a natural right for us to offer our services because we pride ourselves on being a fully verticalized and horizontalized market infrastructure. It's really interesting to see the value that many of these secondary listings find in this.
An example would be if you're in an issuer in a capital-controlled country, let's say, your home currency is peso, you might come to Singapore because we operate in hard currency. You might come to Singapore because we are a DM, a developed market with a different pool of investors than an emerging market. That you could consider to be the Pan-Asian pool. But even if you're a hard currency issuer in a different time zone, you might say there is a pool of people in our trading network, in the Singapore stack, that incrementally is important to you, in fundraising.
Hi. Sorry. Chin Yean from The Business Times. I think recently, there's some reports about lower trading volumes. I think in July, year-on-year trading volumes fell 28%. Is SGX concerned about that, and what is it doing about that?
I think it's all relative. If you look at market volumes, value traded across the globe, they have all been lower in July and parts of August. As you've seen from the Fed, the minutes that was released overnight, I think the market needs to find some visibility on where inflation would settle and where rates would settle. Markets, as I've said many times before, are cyclical. Being a multi-asset exchange, I think that also clearly comes through in a year like FY 2022, where the block platform was able to perform.
Actually, in the year FY 2022, I think Ng Yao Loong may have shown the breakdown. First half of the year, 1.17. Second half of the year, 1.37. What is down and what is up? I would say the up looks very strong. I mean, for the secondary listing of NIO as an example. It's listed here, hasn't even raised funds. It trades $5 million-$8 million a day because our regional retail and institutional pool find it interesting to trade NIO on SGX. The volume is not that far from what actually trades on Hong Kong.
Maybe one other question is there?
Okay. Question from Phillip Securities. Can you remind me how treasury income is computed from margin balances?
Sure.
How much is returned to members? Treasury income.
Yeah. I'll take this question. I think the underlying question is where do we think TI will end up in FY 2023, right? The way we calculate, I mean, we can clearly explain. TI is a function of currency mix, the sort of collateral, and also the liquidity that we have to put in place to meet any kinds of situations. There are a lot of factors involved, so I wouldn't try and hazard sort of a guidance on TI right now. Clearly, I think two points that I want to make.
First, if you are looking for historical periods where you can do a comparison, I mean, clearly we are looking at LIBOR rates, whether it's six months, going up quite rapidly over the next, or has risen and expected to increase over the next 6- 12 months. I think 2017-2019 is probably a period where you can compare, and you will see where the net yields have gone up relative to the increase in LIBORs. I think that will give you a good sense of the potential for treasury income. Secondly, I think the other point that I wanna make is that we have shown you that excluding TI for FY 2022, the underlying businesses across the franchise grew 7%. That's the growth of the business.
If treasury income adds to that as it recovers, then clearly as we look ahead for FY 2023 and beyond, then we are looking at the business growing at a faster pace. As Loh Boon Chye says, we are looking at a medium-term high single-digit revenue growth. Okay. Thank you all for participating. For those of you in Singapore, if you have other questions, we'd be happy to take them outside the auditorium. Thank you.