FIA Asia eMarketBeat
Futures Industry Association Asia

Volume 02, Number 3, April 8, 2009

 

Please direct all feedback on the FIA Asia eMarketBeat to Nick Ronalds.

 

Top Stories

 

Shanghai Exchange’s Steel Contract Starts Big

 

Trading volume in the Shanghai Futures Exchange’s two new steel futures contracts topped 400,000 contracts on March 27, its inaugural trading day, Reuters reported. The two contracts are based on wire rod and rebar, both of which are used to reinforce concrete. Most of the volume was speculative retail trading, according to analyst at a local brokerage house quoted in the story. The article added that the big steel companies have stayed away, in part because they’re not keen to promote a transparent pricing platform.

 

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSSEO6471620090327

http://www.shfe.com.cn/Ehome/contracts.jsp?&subjectpid=9&subjectid=904&startpage=5

 

Cathay and MF to launch First Taiwan Futures Fund

 

Cathay Financial, Taiwan’s top listed financial holding company, and MF Global, a global futures commission merchant, will launch Taiwan’s first ever futures fund pending regulatory approval expected in May, Reuters reported March 20. The fund managers plan to raise T$7 billion and invest in five funds from Man Investments. Two other Taiwanese firms, Polaris Securities and Yuanta Financial, are considering similar forays into managed futures, according to the story.

 

http://uk.reuters.com/article/fundsNews/idUKLNE52J01W20090320?feedType=RSS&feedName=fundsNews

 

Japan’s Commodity Brokers in “Crisis” as Trading Volumes Slump

 

Declining volume in Japan’s commodity futures markets is likely to drive more brokerages out of business after their numbers almost halved in the past five years, according to an April 5 report on Bloomberg. “Japan’s commodity futures industry is now facing an unprecedented crisis following an increase in members who have withdrawn from the sector,” Yuichi Ikemizu, head of commodity trading at Standard Bank Plc in Tokyo, was quoted as saying.

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=auSqOU3Z.RRM&refer=home

 

Interactive Brokers Gets Green Light to Offer Market Access to Indian Customers

 

Interactive Brokers Group has won regulatory approval from the National Stock Exchange of India to provide Indian investors with cross-border access to more than 80 exchanges around the world as well as local access to the equity futures and options traded on the NSE. "We will be focusing on offering our online brokerage services to sophisticated individual investors," Gerald Perez, managing director of Interactive Brokers' London office, said in a statement issued on March 13. "Our clients will be allowed to trade internationally and on the local NSE market on the same trading platform. The experience for our Indian clients will be high-speed online trading to global markets."

 

http://investors.interactivebrokers.com/en/general/about/mediaRelations/03-12-09.php?ib_entity=llc

 

FIA-Asia News

 

FIA Asia Co-Hosts Beijing Seminar May 16

 

FIA Asia will co-host a seminar in Beijing with the Beijing Futures Association May 16 at the Presidential Hotel. Themes of the seminar will include the future of China’s futures in a crisis era and the likely path of liberalization for China’s futures markets. Delegates will include officials and specialists from financial regulatory agencies, executives of Chinese FCMs and institutional users of futures, private investors, and technology professionals. The event will be supported by the China Financial Futures Exchange, the Shanghai Futures Exchange, the Dalian Commodity Exchange, the Zhengzhou Commodity Exchange, the Shanghai Stock Exchange, and the Shenzhen Stock Exchange.

 

Go here for the brochure on the event. For more information, including sponsorship opportunities, contact Nick Ronalds or Anna Lee.

 

FIA Japan Holds Seminar on Liffe Connect

 

The FIA Japan Technology Committee will host a seminar, “Exchange Trading Platform: NYSE Technologies’ Liffe Connect,” on April 24 in Tokyo.

 

http://www.tse.or.jp/english/news/200903/090331_a.pdf

 

New FIA/FOA Study on Clearing Risk

The FIA and FOA recently released a Clearing Risk Study. Copies can be downloaded from the FIA Asia website here

 

Singapore

 

SGX Sets Initiatives to Develop Options Market

 

Singapore Exchange on March 31 announced its plans to embark on three initiatives to develop its options market: enhancing the existing SGX Nikkei 225 Index Options and SGX MSCI Taiwan Index Options contracts; launching the SGX MSCI Singapore Index Options contract; and introducing its web-based electronic trade registration system named “eNLT” or Electronic Negotiated Large Trades. The exchange said these initiatives were set to be implemented on April 6.

 

http://info.sgx.com/webnewscentre.nsf/b9c790d0d5ba5d2548256dcf0049ce28/48256838002f07b14825758a003488b8?OpenDocument

 

SGX Plans Migration to New Trading Platform

 

Singapore Exchange and Nasdaq OMX on March 23 announced they have signed an agreement to plan SGX’s migration to Genium, Nasdaq OMX’s next generation trading platform. Migration to this platform will result in SGX having ultra-low latency and will support the exchange’s initiative to attract more high velocity and algorithmic traders, according to Hsieh Fu Hua, chief executive officer of SGX.

 

http://info.sgx.com/webnewscentre.nsf/b9c790d0d5ba5d2548256dcf0049ce28/48256838002f07b14825758200331ac5?OpenDocument

 

China, Hong Kong SAR & Taiwan

 

China Proposes Alternative to U.S. Dollar as Reserve Currency

 

The Chinese government proposed that the IMF create a system to serve as an alternative to the U.S Dollar as a reserve currency, the Financial Times reported March 23. Analysts were quoted in the article as saying that the proposal reflects China’s concern about the impact of U.S. financial policies on the future value of the dollar.

 

http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html

 

Chinese Premier Inspects DCE

 

Chinese Premier Wen Jiabao visited the Dalian Commodity Exchange March 21 for an inspection tour and a briefing. Such a tour by the head of China’s government would be interpreted in China as a sign of support for the exchange and futures in general.

 

http://www.dce.com.cn/portal/servlet/ServletGate?op=forward&cur_page=DCEPage&target=en_infodetail2&dc=About+us&column=ROOT%3E%B7%C7%D2%B5%CE%F1%3E%CD%F8%D5%BE%3E%D3%A2%CE%C4%3EAbout+us%3EDCE+News&infoid=1237733568100&infotype=CMS.PHOTO_NEWS

 

China Drafting Rules on OTC Derivatives Trading

 

A senior Chinese official of China’s National Association of Financial Market Institutional Investors said March 23 that the central bank was drafting rules for China’s OTC derivatives market, the Wall Street Journal reported. "The foundations of China's derivatives market remain less than perfect...There's a need to strengthen the establishment of relevant laws and regulations," Feng Guanghua, deputy secretary general of the association, said at a financial forum. The Association is overseen by the central bank, according to the Journal.

 

Separately, an official of the China Banking Regulatory Commission said China should develop its OTC derivatives market to accommodate local needs, Reuters reported. The official said the lack of domestic instruments leads Chinese firms to use off-shore products, in half of cases without permission. An official of the central bank at the same event stressed the need for China to develop OTC interest-rate options.

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http://online.wsj.com/article/BT-CO-20090323-716985.html

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSSHA26945520090325

http://www.bloomberg.com/apps/news?pid=20601080&sid=a4pwcx7GFjDM&refer=asia

 

China’s Regulators Crack Down on Derivatives Use

 

The regulator for China’s state owned enterprises issued stricter rules March 23 in the wake of several derivatives-related losses. According to an article in People’s Daily Online, the State-owned Assets Supervision and Administration Commission said SOEs should use derivatives “cautiously” and “strictly” for hedging, not speculation. All derivatives use must be approved by SOE boards and the commission must be kept well-informed of derivatives activity. The crackdown is a response to large losses by Air China, Shanghai Airlines, and China Eastern as a result of poorly constructed hedges.

 

http://english.people.com.cn/90001/90776/90785/6621174.html

 

China Approves Three More QFII’s

 

Three institutions got licenses as Qualified Institutional Investors in February, bringing the total number of QFII’s to 79. A QFII is a non-Chinese institution permitted to invest in Chinese securities up to a specified quota. The China Securities Regulatory Commission announced on its website March 16 that Hanwha Investment Trust Management, Emerging Markets Management, and DWS Investment received QFII licenses in February. In 2008 24 institutions got QFII licenses. It is generally assumed that QFII’s will be allowed to trade stock index futures when they are finally launched.

 

http://www.chinadaily.com.cn/bizchina/2009-03/10/content_7563178.htm

 

China Moves Closer to Nasdaq-Style Market

 

The Wall Street Journal reported March 31 that the China Securities Regulatory Commission issued a rule governing initial public offerings in the planned Growth Enterprise Market, paving the way to launch a Nasdaq-style stock market in China. The rule reduces profitability requirements prior to listing to make it easier for small companies to raise capital and get listed. No launch date has been announced for the new market.

 

http://online.wsj.com/article/SB123846520387272407.html?mod=dist_smartbrief

 

HKEx Names Fung as Head of Clearing

 

Hong Kong Exchanges and Clearing has appointed Derrick Fung as head of clearing. He succeeds Stewart Shing, who has retired from the post. Prior to taking this latest position, Fung was head of cash clearing operations.

 

HKEx Goes Back to Old Closing Auction Method

 

HKEx announced March 12 it would go back to the previous method for calculating closing prices “due to HKEx’s concerns about any appearance of abuse during the CAS [closing auction session] and the need to maintain public confidence in the orderliness, fairness and transparency of the market in light of recent price volatility during the CAS.” The current CAS method was introduced on 26 May 2008. Starting on March 23 the securities market will close at 4 PM and HKEx will go back to using the median of five snapshots of nominal prices taken during the last minute prior to the end of the market’s afternoon session.

          Click Here for News Report

 

HKEx to Add “Price Control Mechanism”

 

HKex announced in a press release March 5 that it will start a “percentage-based” price control mechanism in the Closing Auction Session (CAS) for its cash securities. The scheme sets a price limit of two percent of nominal prices at 4 PM. Orders outside the two percent range would be rejected by the system. The plan requires approval from Hong Kong’s Securities and Futures Commission.

 

http://www.hkex.com.hk/news/hkexnews/0903052news.htm

 

Nasdaq OMX and Taifex in Exchange Partnership

 

Nasdaq OMX Group and the Taiwan Futures Exchange announced on March 13 that they have signed a memorandum of understanding with the intent to pursue a business partnership. Under the agreement, the two exchanges will share information and best practices regarding product development, market operations and common interest areas in the derivatives market.

 

http://www.taifex.com.tw/eng/eng11/2009%2003%2013%20MoU%20of%20TAIFEX%20&%20Nasdaq%20OMX.pdf

 

New Hong Kong Exchange Appoints Albert Helmig as President

 

The fledgling Hong Kong Mercantile Exchange announced in a press release March 26 the appointment of Albert Helmig as its president. The release says Helmig brings to the exchange “more than 35 years of commodities experience spanning both physicals and financial instruments on a global basis.”

 

Japan

 

TFX and C-Com Form Partnership

Tokyo Financial Exchange and Central Japan Commodity Exchange signed a memorandum of understanding on March 26 to “establish a cooperative relationship” involving products and systems. Jiro Saito, the president and chief executive officer of TFX, said that cooperation between a financial exchange and a commodity exchange “will contribute to the future development of both markets in Japan.”

 

http://www.tfx.co.jp/en/newsfile/09/tfx_ccom_e20090326.html

 

Nikkei and Tocom Announce Nikkei-Tocom Index

Nikkei, Japan’s largest economic daily newspaper, has agreed to jointly manage and promote a commodity index developed by Tokyo Commodity Exchange. The two companies said on March 30 that their partnership will “promote and establish the Nikkei-Tocom Index as 1) a benchmark for evaluating investment performance in the commodity futures market of Japan 2) a basis for structuring investment products, and 3) an indicator for developing comprehensive hedging strategies.”

 

http://www.tocom.or.jp/doc/090330Nikkei-TOCOMIndex.pdf

 

TSE Delays IPO, Citing Difficult Market Conditions

 

Tokyo Stock Exchange on March 21 announced that it is delaying its planned initial public offering, citing recent difficult market conditions. The offering was previously scheduled to be carried out this year. TSE Group said it remains committed to its plan to undertake an IPO “at the earliest opportunity” but cautioned that such a plan is contingent upon a turnaround in global financial markets and the exchange’s future revenue.

 

http://www.tse.or.jp/english/news/200903/090324_a.html

 

Tocom Announces New Fee Structure

 

Tokyo Commodity Exchange announced a new fee structure and volume incentive program in a March 17 press release. A higher discount structure will apply during the second quarter, April–June, as a special promotion.

 

http://www.tocom.or.jp/doc/20090317tocomtoreviseexchangefeesandvolume

 

OSE Forms “Strategic Partnership” with Nasdaq OMX

 

Nasdaq OMX Group, a leading provider of technology to Asian exchanges, announced on Feb. 3 that it has signed a memorandum of understanding with the Osaka Securities Exchange with the intent to form a strategic partnership. The two exchanges said they will collaborate on defining technology requirements for OSE’s next-generation trading platform for derivative products scheduled for launch in 2010. Other potential areas of cooperation involve the exchange of market information, exchange of staff and dual-listing opportunities.

 

http://www.ose.or.jp/e/profile/pr_data/pr_090204.pdf

 

India

 

NSE Reportedly Seeks to Sell 1% Stake in MCX

 

India’s National Stock Exchange is seeking to sell its one percent stake in Multi-Commodity Exchange, The Economic Times reported on March 29. MCX, which likewise holds a one percent stake in NSE, said it would not sell that stake, according to the news report.

 

ICE Slashes Value of Stake in India’s NCDEX

IntercontinentalExchange has taken an “impairment charge” of $16 million related to its 8% equity ownership in the National Commodity and Derivatives Exchange, ICE announced on Feb. 10 in its quarterly financial results. ICE acquired its stake in the exchange, India’s second largest commodity futures exchange, for $37 million in 2006. ICE explained that the write-down was driven by the suspension of trading in several key agricultural contracts traded on NCDEX and a law that may require ICE to reduce its stake in NCDEX to 5% by June 30.

 

Other Asia

 

ASX Sets Launch Dates for Coal, Power and Gas Products

The Australian Securities Exchange is making a play for the Asian commodity futures markets. The exchange announced on Feb. 11 the launch dates for the first three products in a whole range of energy and environmental products that it plans to roll out over the course of 2009. The exchange said it intends to list thermal coal (Newcastle) futures and options on April 21, followed by New Zealand electricity futures on April 28 and Victorian wholesale gas futures on May 5. Coming later in the year will be several emissions-related futures and options that will anticipate the Australian government’s plans to start an emissions trading system by July 2010.

http://www.asx.com.au/about/pdf/mr_110209_energy_product_suite.pdf

 

ISDA Concerned about Korea Rulings

The International Swaps and Derivatives Association issued a press release on April 1 expressing concern about rulings made by the Seoul Central District Court on “knock in knock out” (KIKO) currency options. Applying the principle of “changed circumstances,” the judge granted counterparties in the OTC option contracts injunctions suspending the contracts pending the final verdict of the main case. In ISDA’s view, the “Court has set dangerous precedents disrupting the fundamental right to enforceability of contracts in the country.”

http://www.isda.org/press/press040109.html

 

KRX to Help Launch Exchange in Cambodia

The Korea Exchange announced March 23 an agreement with the Cambodian government to jointly launch a Cambodian stock exchange by the end of the year, according to a Reuters article. KRX would own 55% of the exchange. This follows a similar initiative in November of last year, when KRX signed a MOU with the government of Laos for a 49% stake in an exchange there.

 

http://www.iii.co.uk/news/?type=afxnews&articleid=7232782&subject=markets&action=article

 

Korea’s OTC Currency and Interest-Rate Derivatives Boom

South Korea’s regulator, the Financial Supervisory Service, released statistics March 17 showing a 45.9% jump in OTC currency derivatives trading to 13,160 trillion won ($7.4 trillion) in fiscal 2008 compared to the previous year, according to a report in CommodityOnline. OTC interest-rate derivatives rose 28.3% over the same period, to 6,213 trillion won. The dollar-won exchange rate dropped to 1,513 won/dollar at the end of November, vs. 936 at the start of the year, according to Commodityonline.

 

http://www.commodityonline.com/futures-trading/currency/Korea-currency-futures-grows-immensely-2001-2.html

 

Indonesia Stock Exchange Launches Nasdaq OMX Platform

 

The Indonesia Stock Exchange (IDX) successfully launched its new trading platform, “JATS-NextG,” the first week of March, according to a March 9 press release by Nasdaq OMX. The new platform replaces two trading systems used by IDX previously, which were legacy platforms from the merger of the Jakarta and Surabaya Stock Exchanges that led to the creation of IDX. The new platform is designed to facilitate more efficient trading, quote distribution, and market surveillance. It can handle up to a million orders and half a million transactions a day, according the announcement.

 

https://newsclient.omxgroup.com:443/cds/logo?dpId=731

 

TFEX Raises Order Size and Price Change Limits

 

The Thailand Futures Exchange on March 16 announced that it revised its internet trading rules by raising the maximum number of contracts per order and cancelling its price change limits. The bourse said it will also report on the top five bids and top five offers, up from the top three of each. The revisions became effective on March 23. Currently, traders can buy or sell up to 20 contracts per order of SET50 Index futures and up to 100 contracts per order of the SET50 index options. These limits were raised to 100 and 500, respectively, as of March 23. In addition, the exchange will allow bids and offers greater than the previous limit of 5% higher or lower than the previous day’s close, subject to a confirmation.

 

Bursa Malaysia Readies Sharia-Compliant Short-Selling System

 

Bursa Malaysia is readying a scheme to allow short-selling in compliance with Islamic law, which prohibits selling what is not owned, according to an article by FinAlternatives.com. The new scheme would complement the conventional existing short-selling system. The proposed Sharia-compliant scheme would enable short-sellers to “buy” the issue they wish to sell short at a fraction of the issue’s market price in order to sell it. When covering the short position, both sides of the transaction would be offset. Details of the mechanism are still being worked out. The exchange’s CEO was quoted saying the scheme would make the exchange’s markets more efficient.

 

http://www.finalternatives.com/node/7414

http://www.bloomberg.com/apps/news?pid=20601080&sid=aePCB3EbqmfQ&refer=asia#

 

Key to Asian Hedge Fund Growth in Own Back Yard

Asian institutional investors have mostly shied away from alternative investments, but the key to future growth lies in cultivating the considerable wealth held throughout Asia. That’s the view of an official of the Hong Kong chapter of the Alternative Investment Management Association, expressed at a conference March 26 according to a Reuters story.

 

http://in.reuters.com/article/hedgeFundsNews/idINLNE52O01D20090325

 

Trading Costs in Asia Way Up

According to an article in the March issue of AsianInvestor magazine, trading costs in Asian markets have as much as tripled in recent months. The cost rise is due not to increases in exchange fees, which have actually come down, but to the increase in market impact costs owing to soaring volatility and reduced liquidity. The article does not separately address listed derivatives.

 

http://www.asianinvestor.net/article.aspx?CIaNID=100001

 

OIC to Educate Middle Eastern Investors

Nasdaq OMX and The Options Industry Council, the educational arm of the U.S. options exchanges, are working together to develop an equity options education program for Middle East investors and financial advisors. Under an agreement announced on Jan. 29, Nasdaq Dubai will offer seminars and other content provided by the OIC.