FIA Asia eMarketBeat
Futures Industry Association Asia
Volume 02, Number 5, July 20, 2009

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

Top Stories
Taiwan Opens to Mainland Investors
          Chinese investors were able to invest in Taiwan for the first time in 60 years on July 1. The opening was the result of Taiwanese legislation allowing investment from the mainland in 100 sectors ranging from retail to restaurants to industrial manufacturing. Mainland businesses eager to enter the Taiwan market have already signed deals worth $68 billion. The prospect of mainland money pouring in helped propel a 40% rally in Taiwan’s benchmark TAIEX index. Mainland tourism has boomed, as has demand for office space from mainland companies such as Lenovo Group, Sinosteel, and Tiens Group. 
          Click Here for Article

Euroclear Study: Asian Markets too Fragmented for OTC Clearing
          A study by Euroclear Bank says Asia-Pacific efforts to develop OTC clearing systems is being stymied by the “immature” and “fragmented” nature of Asia’s markets, Bloomberg reported July 7. Philippe Dirckx, Asia Regional for Euroclear Plc, said in an interview “the biggest challenge is that there’s no framework to harmonize the regulatory environment, no single currency or regulator.” In Europe and the U.S., three companies have OTC clearing initiatives underway: Intercontinental Exchange, CME Group, and Eurex. Keith Noyes, Asia-Pacific regional director for ISDA, was quoted as saying that OTC trading in Asia Pacific is to thin to support a single-continent clearinghouse, with the possible exception of Japan. 
          Click Here for News Article

China, Hong Kong SAR & Taiwan
China-NYSE Carbon Offset Exchange in the Offing?
          NYSE Euronext (NYX) announced that BlueNext, its majority-owned environmental trading exchange, is partnering with the China-Beijing Environmental Exchange (CBEEC), China’s first state-level environmental rights trading platform. In the June 18 press release, they announced that a venture would be formed to disseminate carbon-trading related information. The agreement encompasses a cross-marketing initiative and data sharing agreement. 
          Click Here for Press Release

China Tightens Derivative Trading Rules, Reporting for SOE’s
          Reuters reported July 8 that China’s regulator of state-owned enterprises and other assets, the State-owned Assets Supervision and Administration Commission, ordered all central government-controlled state companies engaging in trading derivatives to make quarterly reports about their investment situations, according to a statement published on the agency's website (www.sasac.gov.cn). The reports must disclose the companies’ positions in futures, options, forwards and swaps, as well as performance data. SOE’s were ordered to strengthen their risk management practices for derivatives trading. Three state-owned airlines incurred losses totaling $1.94 billion as of the end of January from fuel oil derivative positions that were supposed to be hedges. 
          Click Here for News Article

China’s Sovereign Wealth Fund to Add Hedge Funds to Asset Menu
          Bloomberg reported June 17 that an investment advisor to China’s sovereign wealth fund, the China Investment Corp., said hedge funds would be added to the roster of asset classes used by the fund. The advisor, Felix Chee, an investment manager for Monaco’s Grimaldi Forum who will manage the CIC’s hedge fund investments and proprietary trading, said “the platform would like a core of single-manager funds and fund-of-funds. It’ll be across the spectrum of strategies.” 
          Click Here for News Article

China's ZCE Begins Trading Rice Futures 
          Zhengzhou Commodity Exchange, China's main market for futures on wheat, began trading futures on early rice on April 20, shortly after receiving government approval for the new contract. The new contract traded 49,000 contracts in May. 
          Click Here for More Details

Taifex Reduces Fees for Using Stocks and Bonds as Margin 
          Taiwan Futures Exchange announced on June 23 that it has reduced fees associated with the use of stocks and bonds as margin deposit to 0.1% per annum regardless of the method of securities transfer. Previously, the fee was either 0.125% or 0.20% depending if the securities were transferred to Taifex directly or via a futures broker. In addition, the fees are completely waived through December. TAIFEX first started allowing the posting of securities as collateral in December of 2008. 
          Click Here for More Information

India
BSE’s Young New CEO Plans Revitalization
          The Wall Street Journal ran a profile June 17 on the new CEO of the Bombay Stock Exchange, Madhu Kannan. The 36-year-old Mr. Kannan arrived at the BSE in May after a career at the NYSE followed by a stint at Merrill under John Thain, until Merrill was merged into Bank of America. The article said he plans to revitalize the exchange with better service, new technology and original products—essentially the same strategy that arrested the decline of the NYSE. 
          Click here for News Article

Japan
TSE Postpones New Options Trading Platform
          The Tokyo Stock Exchange announced that it has postponed the target date to implement its new trading platform, Tdex+, to Oct. 5. The exchange said in the June 26 announcement that it postponed the date by two months “to take all possible measures to ensure stable system operation.” The exchange said it will confirm the implementation date to the new trading platform, which is based on technology provided by NYSE Euronext, in early September.
          Click Here for Press Release

Singapore Allows TFX to Offer Remote Access
          Tokyo Financial Exchange was granted recognized market operator status from Singapore’s Monetary Authority on June 22, allowing qualifying investors to become a remote member of the exchange and trade its interest rate futures contracts directly. TFX said in its July 3 press release that it is the first exchange in Japan to receive such status in Singapore. TFX began allowing offshore firms to become remote members of the exchange last year and has received approval from regulators in the U.S. and the U.K. to promote the remote membership program in those countries.
          Click Here for Press Release

TOCOM May List Copper & Other New Products
          Tadashi Ezaki, the new CEO of the Tokyo Commodity Exchange, said in a Bloomberg News interview July 1 that the exchange may list copper zinc, lead and liquefied petroleum gas to its product slate. The exchange has suffered slumping demand and its first loss in the fiscal year just ended March 31 since it opened in 1984. Exchange volumes have fallen four of the past five years. The exchange recently took several steps to attract more global business, such as introducing a faster trading platform, extending trading hours, and replacing daily price limits with a system of “circuit breakers.” The exchange plans to start a market-maker program in October. 
          Click Here for News Article

Japan’s OSE Establishes Remote Access
          Osaka Securities Exchange has established a remote transaction participant system to allow foreign securities brokers to access directly OSE markets without having a branch office in Japan. Access for qualified foreign securities brokers became available on June 12, the exchange said.

OSE Finalizes Launch Date for FX Margin Trading
          Osaka Securities Exchange announced a July 21 launch date for FX margin trading. These contracts are effectively exchange-traded versions of the currency trades that have been popular with Japanese retail traders for the last several years. In the June 16 circular, OSE announced that the launch would include contracts based on nine currency pairs. The launch had been initially set in March. This latest contract launch comes at a key time as FX margin trading has proven to be very successful at the Tokyo Financial Exchange, which introduced similar contracts in 2005 in its “Click 365” market. These TFX contracts have been growing rapidly ever since, with volume averaging five million contracts traded per month so far this year. 
          Click Here for OSE Circular

Japan's TFX Examines OTC Clearing
          Tokyo Financial Exchange released a study on OTC clearing and concluded that any central clearing house it establishes should target interest rate swaps and credit default swaps. But the exchange committee undertaking the review noted that clearing members should be different for each of these asset classes. Noting that the major market participants in Europe and U.S. are using SwapClear from LCH.Clearnet, TFX also concluded that it should cooperate with LCH.Clearnet. Furthermore, the TFX committee decided that the first product to be cleared should be a yen-denominated plain vanilla swap. 
          Click Here For TFX Study  

Korea
Foreign Banks in Korea Oppose Proposed New Restrictions on Derivatives
          A bill before the Korean legislature in early July would force banks to get regulatory approval before selling new types of derivatives, including credit risk, natural or environmental or economic risks, Bloomberg News wrote.  Michael Hellbeck, chairman of the Foreign Bankers Group in Seoul, said regulators should focus on preventing abuses rather than stifling innovation. The bill appears to be a reaction to government bail outs of 3.8 trillion won ($3.4 billion) for exporters who incurred losses from positions in currency options. 
          Click Here for Article

Korean regulator to require reviews of derivatives products
          As part of a broader effort to prevent risks to South Korea's financial system, the Financial Supervisory Service will require brokerages, banks and Seoul branches of foreign banks to complete quarterly stress tests on their derivatives products, the Financial Times reported in May. The idea is to assess how a financial crisis might affect the investment products and therefore the firms' balance sheets. "If potential losses are found to be unmanageable, the watchdog plans to advise financial firms in question to readjust the weight of derivative sales in their business portfolios," an FSS official said. 
          Click Here for Article

Singapore
SGX Now Offers Drop-Copy API for Risk Management
          Singapore Exchange has begun offering a drop copy service to assist futures clearing firms with managing the risks of direct market access. The service allows member firms to receive duplicate copies of customer orders in real time, according to a circular issued on June 1. The service also allows member firms to submit order cancellation requests on behalf of their customers’ trading connections. SGX said the drop copy functionality will give member firms a “consolidated view” of customer trading activities. This is particularly important for customers that are permitted to submit orders directly to the exchange, which means that their orders bypass pre-trade risk filters maintained by member firms.

SGX May Clear Asian OTC Financial Products
          The Singapore exchange is considering clearing over-the-counter financial derivatives, according to a June 16 Financial Times story. Gan Seow Ann, head of markets at SGX, was quoted as saying OTC clearing of index options, currencies, and interest-rate swaps were “possibilities.”  SGX already has a clearing facility for energy and freight-related products that has seen substantial growth over the past year. The FT articles noted that the Hong Kong Exchange did a study last year that concluded there may be interest in its market for OTC clearing. In Japan, the Japan Securities Clearing Corporation and Tokyo Stock Exchange said they would set up a working group to launch OTC interest rate swaps and CDS by the first half of 2010. 
          Click Here for News Article

Thailand
TFEX Volume Up 62.5% in First Half of 2009 
            Thailand Futures Exchange announced on July 8 that volume for the first half of 2009 was up 62.5% from the same time a year ago. Kesara Manchusree, the exchange’s Managing Director, said the performance was the result of an expanded product slate, increased membership, and marketing. The exchange launched gold futures in February and 11 additional futures on individual stocks in June. The number of accounts at the end of the first half was 22,659, almost 43% more than a year go. According to the press release, TFEX plans to launch an interest-rate contract in the middle of next year. The top five brokerage firms by volume were Kim Eng Securities with an 11.02% market share, Phillip Securities (Thailand) at 10.49%, KGI Securities at 8.68%, Trinity Securities at 8.05%, and Phatra Securities at 5.27%.  The exchange plans to launch a marketing campaign for futures and options on the SET50 index, “Click2WIN,” starting July.

Thailand to Allow Access to Foreign Markets to Gold Market Makers
          Thailand announced in late May that it would allow gold futures market makers to access foreign gold futures to facilitate their market making. The rule creates an exception to the general prohibition by Thai authorities on access of foreign futures for Thai traders.

          Click Here for More Information

Other Asia
Pakistan Commodity Exchange to Launch Crude Futures
          Pakistan plans to introduce a Brent crude oil futures contract on its National Commodity Exchange by the end of July, Bloomberg Reported on June 22. Amjad Khan, Managing Director of the exchange, said a local crude futures contract risk would enable local hedgers to contain the costs of imported oil and would help stabilize prices in the local market. The exchange also plans to launch foreign currency futures in August, and has regulatory approval to list rice futures, though no launch date for rice has been announced, according to the report. 
          Click Here for News Article

NYSE Euronext to Acquire Stake in Qatar Exchange
          BBC news reported June 19 that the NYSE Euronext will acquire a 20% stake in Qatar Exchange for $200 million, beating out the London Stock Exchange, which had also bid for the deal. Andre Went, a senior NYSE Euronext executive, will head the new exchange. Qatar Holdings, the sovereign wealth fund for Qatar, will own the other 80% of the exchange. The Qatar Finance Minister was quoted as saying the exchange’s aim was eventually to attract global business for currently trading stocks and but also other products. 
          Click Here for BBC Report

FIA Asia News
FIA Japan Elects Board 
          At its annual meeting on April 9, members of the FIA Japan division of the Futures Industry Association elected the following individuals to serve as members of the board for the coming year: Osamu Akita, Japan Commodity Futures Industry Association; Mitch Fulscher, FIA Japan; Hidetoshi Hamada, The Tokyo Grain Exchange; Mikio Hinoide, Osaka Securities Exchange; Junnosuke Inoue, Unicom Group Holdings; Koichi Iwanaga, Sumitomo Corporation; Peter Jaeger, J.P. Morgan Securities Japan; Mikio Kawamura, Tama University; Fumihiko Kimura, Central Japan Commodity Exchange; Takanori Kosaka, HSBC Securities (Japan); Yoshio Kuno, CME Group, Tokyo Office; Naoaki Kurumada, Dot Commodity; Julien Le Noble, Newedge Japan; Hironaga Miyama, Tokyo Stock Exchange; Shinjiro Mizuno, Kanetsu Shoji; Yasuo Mogi, Newedge Japan; Hideki Noda, Orix Investment Corporation; Koichiro Ohashi, White & Case; Shozo Ohta, Tokyo Financial Exchange; Mitsuhiro Onosato, Tokyo Commodity Exchange; Michael Ross, GL Trade Japan/Sungard; Scott Shenk, Merrill Lynch Japan Securities; Duncan Symmons, Patsystems Japan; David Wilkinson, Equinix Japan; and Seiji Yuki, Okato Shoji.

          At the first meeting of the new board, the members elected the following individuals as officers for the coming year: Mitch Fulscher as chairman; Shozo Ohta of Tokyo Financial Exchange as president; Yasuo Mogi of Newedge Japan as vice president; Koichiro Ohashi of White & Case as secretary; and David Wilkinson of Equinix Japan as treasurer.

FIA Asia Welcomes New Members

          FIA Asia is pleased to announce that applications for membership from three firms have been approved by the board of directors. The Singapore Mercantile Exchange and securities firms CLSA and DBS Vickers Securities have been accepted as regular members. In addition, Equinix, ORC Software and Eurex have been accepted as associate members.