If you're coming from the First Principles Brief, you already know what SGX does and why the business exists. This is where the analysis deepens. What follows is a structured assessment of SGX's competitive moat, management quality, and financial health. These are the three pillars that determine whether this business is worth owning at the right price.
Check out the First Principles Brief here:
Singapore Exchange Limited (S68.SI): The Exchange Is the Infrastructure
Singapore Exchange Limited (S68.SI) analysis: exchange monopoly, fee-based revenue model, strong returns, and downside risks.
Ryan Gallinera
Pillar I: The Moat — What keeps capital flowing through and competitors out
SGX is not a financial services company in the traditional sense. It does not lend, it does not invest, it does not take risk on the assets that move through its infrastructure. What it does is operate the system. This system is the singular venue through which equities, derivatives, currencies, and commodities trade, clear, and settle in Singapore. The moat analysis below applies to the entire integrated business, because unlike most exchange operators, SGX's competitive advantages are not segment-specific. They are architectural.
Five layers of competitive protection
The statutory monopoly is the floor, not the ceiling
SGX holds the exclusive licence to operate Singapore's securities and derivatives exchange, granted under the Securities and Futures Act and overseen by the Monetary Authority of Singapore. No competitor can legally offer an equivalent service. This is not a dominant market position. It is a statutory monopoly.1
But the licence alone does not explain durability. Regulatory monopolies can be revoked, modified, or made irrelevant by structural shifts in how capital moves. What makes SGX's monopoly durable is that the licence sits on top of three self-reinforcing competitive layers that would survive even if the regulatory exclusivity were theoretically relaxed.
Network effects compound on both sides of the trade
Liquidity attracts liquidity. SGX has established itself as Asia's primary offshore venue for China and India exposure. The FTSE China A50 futures, GIFT Nifty, iron ore swaps, INR/USD FX futures and those contracts became self-reinforcing long ago. In FY2025, currency derivatives volumes grew 49.7% to 73.6 million contracts; commodity derivatives rose 6.2% to 65.3 million contracts. In 1H FY2026, the momentum continued: OTC FX headline ADV reached US$180 billion, up 32.3% year-on-year.2
Displacing SGX from these products would require rebuilding the entire institutional participant base, pricing infrastructure, and clearing relationships somewhere else — not building a better mousetrap, but convincing every participant to move to a new house simultaneously. That does not happen incrementally. It requires a systemic shock, and even then, path dependency reasserts itself quickly.
The network effect is not theoretical. SGX FX is now among the top three exchange-backed OTC FX venues globally. A position it did not hold five years ago, built entirely on the gravitational pull of existing volume attracting new participants.3
The November 2025 launch of Bitcoin and Ether perpetual futures extended the franchise into digital assets — bringing an offshore-native instrument onshore with institutional-grade clearing and margining. Nearly 2,000 lots traded on day one (~US$35 million notional), with DBS Bank and OKX among the initial clearing members. The product is early-stage, but the strategic logic is the same one that built the FX franchise: bring an existing, high-volume payoff structure onto regulated infrastructure, and let the clearing guarantee do the marketing.2a
Infrastructure lock-in is operational, not contractual
Clearing and settlement are not ancillary to trading, they are the nervous system. SGX's Central Depository handles post-trade functions for equities, including the daily buying-in process: when a seller fails to deliver, SGX purchases the shares on the open market and completes settlement on behalf of the buyer. That is the backstop that makes the system trustworthy.4
Participants connect through years of integration, compliance work, and capital commitment. Switching costs are not financial, they are operational and relational. A bank that has spent two years integrating its risk systems with SGX's clearing infrastructure is not evaluating alternatives on a quarterly basis. The lock-in is embedded in the plumbing, not in a contract with a notice period.
The data and connectivity layer -recurring revenue without volume risk
Market data, indices, and co-location services generated S$238 million in net revenue in FY2025 — up approximately 3% year-on-year, with data income up 8% and connectivity up 11.8%. In 1H FY2026, the acceleration was visible: market data revenue grew 15.5% to S$29.0 million, driven by repricing and fee recoveries; connectivity revenue grew 10.8% to S$46.3 million, driven by higher co-location sales.5
Unlike trading fees, this revenue does not swing with volume. It is subscription-like: recurring, sticky, and it grows as more participants connect. Every new co-location rack, every new data feed subscription, every new index licence creates incremental recurring income that persists regardless of whether markets are quiet or volatile. This segment now represents a meaningful and growing share of total revenue, and it compounds independently of the transactional engine.
The listings deficit - where the moat thins
The honest assessment requires naming where the moat ends. SGX's dominance in Singapore is unconditional. Its position in derivatives is real and growing. But the equities listings market has been a structural weak point for years.
Delistings outpaced new listings persistently. In 2024, 20 companies delisted while only 4 new ones listed. In the first four months of 2025, at least 8 SGX-listed companies announced potential delisting and at least 11 received privatisation offers — low liquidity and undervaluation cited as primary reasons. The number of listed companies reached a two-decade low by 2024.6
Early signs suggest intervention may be working. In 1H FY2026, SGX recorded 15 new equity listings raising S$3.0 billion, compared to just 5 in the prior-year period. Total market capitalisation rose 22.3% to S$1.06 trillion; retail participation hit a four-year high. The S$5 billion MAS Equity Development Programme and reforms from the Equities Market Review Group, including the consolidated listing review function under SGX RegCo and a proposed Global Listing Board in partnership with Nasdaq, appear to be gaining traction.7
This is not a resolved problem. Delistings and privatisations continue. But the pipeline has depth beyond a single-half data point: NTT DC REIT listed in July 2025 as the largest REIT IPO on SGX in a decade (raising ~US$773 million with GIC as cornerstone investor), Info-Tech Systems became the first mainboard IPO in two years, and Centurion Accommodation REIT debuted in September 2025. SGX has indicated that more than 30 companies are actively preparing to go public.7a Whether the structural decline in the listed universe is reversing or merely pausing remains the open question. But the pipeline is no longer a hope. It is visible.
The moat is intact. But one part of the system, the listings has been quietly eroding for years. That erosion does not threaten the derivatives franchise or the data business. But it constrains the equities segment's growth trajectory in a way that the rest of the business does not face.
Takeaway: The toll-road compounding playbook
There is a pattern worth naming here, because it appears across the most durable infrastructure businesses globally. SGX like the London Stock Exchange Group, like CME Group, like Hong Kong Exchanges & Clearing, operates as a vertically integrated financial infrastructure monopoly: it provides the venue, operates the clearing, handles the settlement, owns the data, and charges at every layer. There is no competing venue that replicates the full stack. The value chain is owned end-to-end.
This is not accidental. It reflects a deliberate strategy — accelerated under CEO Loh Boon Chye since 2015 — to transform SGX from a Singapore-centric equities exchange into a multi-asset derivatives and data hub for Asia. The acquisitions of BidFX (FX trading), Baltic Exchange (shipping benchmarks), and Scientific Beta (smart beta indices), followed by the launch of crypto perpetual futures in late 2025, reflect a conscious build-out of recurring, non-volume-dependent revenue streams that widen the toll road without requiring more traffic.8
When you find a business that operates the infrastructure through which an entire financial system must flow — where the licence is exclusive, the network effects are self-reinforcing. The switching costs are embedded in operational plumbing, and the data layer generates recurring revenue regardless of volume. Considering these, you have found something that is extraordinarily difficult to replicate. The question is never whether the moat exists. The question is whether the price still leaves room for the moat's returns to reach new shareholders.
SGX's moat is genuine, arguably one of the most structurally defensible in the Singapore-listed universe. But it operates within a boundary: the same government that grants the monopoly licence sets the regulatory framework within which pricing power, product innovation, and capital allocation decisions operate. MAS is not an adversary, it is a partner. But the partner holds the pen.
The business is assessed. What comes next is the harder question: who is stewarding it, and what does the stewardship role require from here?
Pillar II: Loh Boon Chye Is the Steward and the Strategic Question
Loh Boon Chye was appointed CEO of SGX Group. The holding company listed as S68 on its own exchange. In July 2015, following a three-decade career across MAS, Morgan Guaranty, Deutsche Bank, and Bank of America-Merrill Lynch. He holds no controlling stake; insiders collectively own less than 1% of SGX, approximately S$154 million at current prices. One-share-one-vote. No dual-class shares. No founder-led entrenchment.9
This is a different stewardship question from a founder-led business. SGX is a professionally managed infrastructure entity where the CEO serves at the pleasure of a board that answers to a regulator. The alignment question is not about economic skin in the game. It is about what kind of stewardship the business now requires, and whether the market is paying for the right kind.
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