The FIA Asia Newsletter

FIA Urges Indian Government to Drop Proposed Tax on Commodity Futures Transactions

WASHINGTON, D.C.-April 23, 2008-The Futures Industry Association today released the text of a letter sent to the Indian government that expressed strong opposition to the recently proposed transaction tax on commodity futures. The letter was sent to Prime Minister Manmohan Singh, Minister of Finance P. Chidambaram, Minister of Agriculture Sharad Pawar and other senior government officials as well as key members of Parliament. In the letter, FIA President John Damgard described the "negative consequences" that typically flow from such proposed taxes, and warned that the proposed tax could result in driving trading volume to foreign exchanges and hampering the future growth of India's commodity futures exchanges.

"India's young but vibrant commodity futures exchanges have earned the respect of the futures industry worldwide," Damgard said. "I encourage the Indian government to avoid an unnecessary tax burden and permit these markets to continue to flourish."

"In recent years, India's commodity futures markets have grown spectacularly, but they are still far too nascent to be burdened by a tax that would increase transaction costs by 800%," Damgard added. "We have seen from past experience in Japan, Taiwan and the U.S. that such proposals drive business offshore and ultimately result in lower tax revenues and a loss of international competitiveness."

The FIA is the leading trade organization for the international futures industry. It is based in Washington, D.C., and its membership includes the world's largest futures brokers as well as leading derivatives exchanges from more than 20 countries. For more information, please contact Will Acworth (wacworth@futuresindustry.org) at (202) 466-5460.

The FIA is the leading trade organization for the international futures industry. It is based in Washington, D.C., and its membership includes the world’s largest futures brokers as well as leading derivatives exchanges from more than 20 countries. For more information, please contact Will Acworth (wacworth@futuresindustry.org) at (202) 466-5460.

FIA Publishes Survey of DMA Risk Management Practices

On Dec. 3, 2007, the Futures Industry Association published a six-page “profile” on the practices used by exchanges and futures commission merchants to monitor and manage the risks of clients that access exchanges directly. The paper summarized the practices in place at six exchanges: the Chicago Board of Trade, the Chicago Mercantile Exchange, Eurex, IntercontinentalExchange, Liffe and the New York Mercantile Exchange.

The paper also reviewed risk management practices in use among futures commission merchants, such as establishing access to the client’s own pre-trade risk controls and automating post-trade risk calculations. The FIA initiated the project in response to the growth of a type of direct market access that is significantly different, from a risk perspective, than traditional types of order routing access. In order to reduce latency and to have more control over their trading environment, a number of market-making firms, financial institutions, and funds wish to electronically access futures exchanges directly without passing through an FCM’s infrastructure. This makes traditional forms of pre-trade risk management less effective, and in response the industry has developed various methods for monitoring this type of trading activity and managing the associated risks.

For additional information about this type of direct market access and the associated risk management issues, see the following articles in Futures Industry:

Pure Direct Market Access on the Rise
By Stephane DiTullio
http://www.fiaasia.org/fi-magazine-home.asp?a=1080

Fast and Furious: Risk Management in a DMA Environment
By Nina Mehta
http://www.fiaasia.org/fi-magazine-home.asp?a=1138

Clearing the Deck: CME Introduces “Drop Copy” Functionality
By Sarah Rudolph
http://www.fiaasia.org/fi-magazine-home.asp?a=1203

Engage China Coalition Supports Strategic Economic Dialogue

Washington, D.C. - Dec. 11, 2007 - Engage China, a coalition of nine U.S. financial services trade associations, today released a statement strongly supporting the goals of the U.S.-China Strategic Economic Dialogue, which will hold its third meeting in Beijing on Dec. 12 and 13. The FIA is a member of the Engage China coalition and joins with the other groups in believing that continued engagement with China is the best way to remove the barriers that our members face when seeking to do business in China.

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China (Shenzhen) International Derivatives Forum (CIDF)
December 3-4, 2007
Shenzhen Wuzhou Guest House
Shenzhen, China

FIA will host the 2007 China (Shenzhen) International Derivatives Forum（CIDF), along with the China Futures Association, Shenzhen Stock Exchange, and the People's Government of Shenzhen Municipality. The event will provide an important platform for communication and exchanging information within global derivatives industry, and meanwhile building relationships and creating valuable networking opportunities. The CIDF is also a good place to learn about the latest Chinese policies and regulations in the financial industry.

FIA Asia Announcement
The FIA is pleased to announce that Nick Ronalds, who has had a broad range of experience in the futures industry including many years in Asia, has agreed to serve as the senior advisor to FIA Asia. In this capacity he will work with the members of the FIA Asia Formation Committee to achieve its objectives of creating an effective presence in the Asia-Pacific region. He will oversee FIA Asia's services to its members, including publications, educational services and other projects, and work toward timely opening of an Asian office.

Nick was until recently Director of Marketing at UBS Securities and prior to that spent 10 years as global marketing manager for ABN Amro's futures division. In addition to overseeing the development and delivery of marketing initiatives to a wide range of clients, he specialized in advising institutional users of exchange-traded derivatives on effective strategies for trading and risk management. Before ABN Amro, he was a managing director of the joint CME/CBOT Asia office, where he marketed futures and options throughout Asia for seven years.

Nick has also written numerous articles for the Wall Street Journal, Futures Industry, Futures Magazine, International Financing Review, and the Journal of International Financial Markets. He has also co-authored a chapter on Chinese commodity markets in the book Intelligent Commodity Investing, published this past spring by RiskBooks.

Nick also has taken an active role in promoting better public understanding of futures and options in other venues. He was president of the CFA Society of Chicago from 2004 to 2005, and has been an adjunct professor of finance at the Illinois Institute of Technology. He is a CFA charter holder and also holds a Financial Risk Manager (FRM) designation.

Foo-Shiung Ho, who headed the organization since its formation in 2005, recently joined a brokerage firm in Taiwan as a senior executive. We wish him the best in his new endeavor.