Following a significant number of changes made last year which delivered substantial benefits to customers by reducing infrastructure and trading costs, and lowering the barriers to entry for new customers, the fees and charges for the Sydney Futures Exchange in 2006 remain largely unchanged. In keeping with prior years, the Exchange has retained a number of incentive schemes to develop liquidity. The Large Volume Rebate will be retained to reduce costs for the Exchange’s largest customers, and the thresholds will be adjusted similar to prior years – albeit the uplift in qualification thresholds are substantially less than in 2005. The Local Rebate Scheme and the Proprietary Rebate Scheme will be retained without modification albeit, as foreshadowed in a separate announcement, SFE will modify the rebate incentives in 2006 in conjunction with the permanent implementation of ½ basis point trading in the 3 Year Treasury Bond futures contract. These changes will seek to reward individual proprietary traders with reduced fees at higher volumes via the Proprietary Rebate Scheme. Further details will be provided later in 2006.
With regards to SFE Austraclear, while leaving the majority of fees unchanged, a few significant changes have been made aimed at rewarding customers who increase their transaction volumes through substantial fee reductions.
Specifically the changes include:
SYDNEY FUTURES EXCHANGE/SFE CLEARING
The Large Volume Rebate Scheme
As a result of the annual adjustment, the growth in exchange volumes required to achieve a similar rebate in 2006 compared to 2005 is estimated to be 10%.
This compares to a current year growth rate of 21 % for 2005 over 2004 (YTD October). The Proprietary Rebate Scheme will continue to be funded from the Large Volume Rebate pool.
Risk charges/payments
Interest paid to clearing participants on house margins lodged with SFE Clearing has been increased by 15 bps p.a.
The rate paid to clearing participants on commitments lodged as part of the clearing guarantee fund has been reduced from 2% to a more market oriented 1% p.a.
Other Incentives
The exchange will continue to offer a range of transaction fee incentive programmes to new traders, specialist proprietary trading firms, and market makers designed to build and retain liquidity.
SFE AUSTRACLEAR
Transaction & Holdings charges
The charge for transacting fixed interest securities, one of SFE Austraclear’s core services, has been reduced by 21%, from $14 to $11 (excluding GST) (making it the same as for discounted securities). Conversely, nominal depository holdings charges will increase to partly offset the substantial real price reductions that have occurred in recent years as the stock of depository holdings has increased. The charge for processing cash transactions has been increased 7% from $3.50 to $3.75 (excluding GST). However, in order to incentivise facility usage all cash transfer transactions in excess of a participant’s 2005 total will be free of charge.
Membership & network fees
No changes have been made to annual membership and network fees for Austraclear system participants. However, the current network access options will change after the introduction of the replacement system during 2006, and revised charges will be introduced at that time to reflect the cost of the increased bandwidth and resilience capability.
SUMMARY
While SFE is not in a position to predict exchange or depository volumes, and therefore revenues in 2006, it is able to calculate the impact of the foregoing changes to its fees and charges on the assumption that exchange trading and SFE Austraclear depository volumes remain constant. On this basis, and assuming that all other factors remain the same as in 2005, the net annual impact of the fees and charges alone, which will affect both revenue and expense, is expected to be equivalent to an increase of approximately 8% in group revenue, excluding interest.
If, as expected and in keeping with long run growth trends, exchange volumes grow again in 2006, the growth will deliver both a larger than 8% increase in SFE revenue and progressively lower average transaction fees to participants via SFE’s various volume based rebate schemes. For example SFE has estimated the following outcomes, assuming all factors remain the same as in 2005.
Sydney Futures Exchange
Volume growth |
2006 Large Volume Rebate pool |
SFE revenue growth |
0% |
$5 - $6 m |
Approx 8% |
10% |
$13 - $15 m |
Approx 10% |
20% |
$18 - $20 m |
Approx 15% |
Note: These projections should be treated with caution as they are subject to assumptions in relation to a large number of variables – no assurance can be given that actual outcomes will substantiate the assumptions.
Full details of the 2006 fees and charges can be found on the SFE Corporation website at www.sfe.com.au. (See SFE Notice 151/05).
M E DAVEY
Chief Financial Officer
About Sydney Futures Exchange
SFE Corporation Limited (SFE) is a publicly listed provider of exchange-traded and over-the-counter financial services for investors globally. Fully electronic and with 24-hour trading capability, SFE offers trading products for investment and risk management and disseminates market data and information. SFE Clearing is the fully owned clearing and settlement arm of SFE Corporation Limited, and provides central counterparty clearing, central securities depository and cash settlement services.
