FIA Asia eMarketBeat
Futures Industry Association Asia
Volume 02, Number 6
September 21, 2009
Please direct all feedback on the FIA Asia eMarketBeat to Nick Ronalds.
Top Stories
CME Broadens International Alliances
CME Group is partnering with Bursa Malaysia, its fourth international alliance. In a joint press release issued Sept. 17, CME and Bursa said they signed a strategic partnership that will facilitate the globalization of the Malaysian crude palm oil futures market and the Bursa Malaysia derivatives market in general. The two exchanges said CME would use Bursa Malaysia’s ringgit-denominated crude palm oil futures contracts to develop a dollar-denominated contract for listing on CME’s Globex platform. Malaysia is the world’s second largest producer of the edible commodity. The two exchanges also said Bursa’s other futures products, both new and existing, will be eventually listed on Globex. CME also will acquire a 25% equity interest in Bursa Malaysia Derivatives Berhad, a wholly-owned subsidiary of Bursa Malaysia, with payment in the form of both cash and CME shares.
In related news, CME and the Korea Exchange are putting the final touches on a plan to list futures on the Kospi 200 stock index on Globex and expect to go live with the link soon. Although Globex trading of Kospi futures will be available only during the hours when KRX markets are closed, the two exchanges expect the partnership to substantially increase global access to one of Asia’s most actively traded futures contracts. Kospi futures rank as the third most active equity index futures in Asia, with more than 43 million contracts traded in the first half of 2009. The CME also has order-routing agreements in place with Brazil’s BM&FBovespa and the Dubai Mercantile Exchange.
http://www.bursamalaysia.com/website/bm/media_centre/media_releases.html?/bm/media_centre/media_releases/years/2009/20090917_133932125.html
New Studies Completed by FIA Asia
FIA Asia has completed two studies, one on collateral acceptable to Asian exchanges and the other on default procedures at Asian exchanges. The two studies are available in the members-only are of the FIA Asia website here (http://www.fiaasia.org/members/Default.asp?Func=Logout)
SGX and Sicom Launch Trade Transfer Facility
Starting on Oct. 1, members of the Singapore Exchange will be able to directly access the rubber futures traded on the Singapore Commodity Exchange, the two exchanges announced on Sept. 16. All SGX trading members are eligible to become "affiliated traders" of Sicom and will not be required to meet additional financial obligations, they said. In addition, they will be able to use their current clearing and risk management arrangements with the SGX clearinghouse to clear trades executed on Sicom. SGX bought Sicom in March 2008 to expand its presence in the commodity markets. http://www.sicom.com.sg/
China, Hong Kong SAR & Taiwan
Hong Kong Regulator Announces Delay in Remote Participation
Hong Kong’s futures regulator, the Securities and Futures Commission, published a summary of the responses to its Feb. 27 request for comment on proposed regulatory changes to allow remote trading on HKEx. A total of 16 firms submitted comments, five of them anonymous. The concerns expressed by respondents fell mainly into three categories: the local employment impact of allowing remote participation; regulatory enforcement; and risk management. The SFC gave its own comments on each of the concerns raised but concluded that further study and consultation with market participants should be undertaken before allowing remote participation.
http://www.sfc.hk/sfc/doc/EN/speeches/public/consult/08/conclusions%20_TM_20090710.pdf
New Chinese Regs Disadvantage Foreign Banks
The Wall Street Journal reported Sept. 3 that rules going into effect Sept. 16 could effectively shut foreign banks out of the over-the-counter derivatives market. According to the newspaper, the rules would require foreign bank affiliates in China to get credit guarantees from their parent companies to deal in OTC derivatives with the big state-owned Chinese banks. Few bank holding companies would be willing to tie up that much capital, the article said, effectively putting the biggest potential customers in the growing Chinese OTC derivatives market out of play for foreign banks. China’s five largest commercial banks are Bank of China, Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of Communications. These five banks provide about 80% of the liquidity to the domestic money market, according to the Journal.
http://online.wsj.com/article/SB125185638837478193.html?mg=com-wsj
China May Allow SOEs to Default on Derivative Contracts
A report in China’s Caijing magazine quoted an industry source as saying Chinese state-owned companies will be allowed to default on commodity derivative contracts. The Caijing article said the China’s Assets Supervision and Administration Commission, the regulator of state-owned enterprises, has advised six foreign banks that the SOEs reserved the right to default. However, a subsequent Reuters story (linked below) quoted an anonymous Chinese official as saying that SASAC’s move was not a general policy but intended to target certain deals that might have had “insufficient information disclosure” or where the two counterparties might have had “disputes” over certain details. CITIC Pacific, one of China’s biggest SOEs, lost over $2 billion in foreign exchange positions, while China’s three largest airlines, Air China, China Eastern, and Shanghai Air, collectively lost $1.94 billion in poorly constructed energy hedges.
http://www.reuters.com/article/marketsNews/idUSPEK1183220090831
http://dealbook.blogs.nytimes.com/2009/08/31/china-derivatives-losses-trouble-ties-with-banks/
http://www.reuters.com/article/ousiv/idUSTRE5801UT20090901
India
India’s NSE Launches Bond Futures
The National Stock Exchange of India began trading a government bond futures contract on Aug. 31, the second attempt at establishing a bond futures market in India. More than 14,000 contracts traded on the first day. The contract is based on a 10-year government bond with a 7% notional coupon. The Bombay Stock Exchange and the Multi Commodity Exchange are also seeking regulatory permission to offer interest rate futures.
Click Here for More Information
Sugar Company Buys Stake in NCDEX
Shree Renuka, an Indian sugar producer and processor, got the nod from the Indian commodity market regulator, the Forward Market Commission, to buy a 5% stake in National Commodity & Derivatives Exchange. According to a statement filed with the Bombay Stock Exchange on Aug. 18, the company will buy the stake from two foreign investors, Goldman Sachs and IntercontinentalExchange, that are required to bring their stakes in NCDEX below a 5% threshold set by government regulation. Goldman Sachs owns 7% of the exchange and ICE 8%.
http://economictimes.indiatimes.com/Markets/Stocks/Stocks-in-News/Shree-Renuka-to-buy-5-stake-in-NCDEX-stock-up-5/articleshow/4906073.cms
http://online.wsj.com/article/SB124808255190764775.html
NSE Head Blasts Dark Pools, Says Foreign Tie Up “Inevitable”
The Financial Times reported Sept. 1 that the president of the National Stock Exchange of India, Ravi Narain, said he was “extremely disturbed” by the growing trend toward trading via dark pools. They could lead to the “biggest chunk” of the market being opaque and leave the “residual investor” underserved, he was quoted as saying. Narain also said it was “inevitable” NSE would eventually seek a tie-up with a foreign exchange but that exchange valuations had in the recent past been too high to make sense.
http://www.ft.com/cms/s/0/e05d00a6-9690-11de-84d1-00144feabdc0.html?nclick_check=1
Japan
TSE Identifies Market Makers for Tdex+ Options
The Tokyo Stock Exchange has named five firms that will act as market makers for its equity and fixed income options when the new trading platform, Tdex+, goes live on Oct. 5. They are Merrill Lynch Japan Securities, Mitsubishi UFJ Securities, Newedge Japan, Société Générale Securities, and UBS Securities Japan. Market makers will continuously quote bids and offers for the contracts assigned them. http://www.tse.or.jp/english/news/200909/090904_a.html
http://www.tse.or.jp/english/news/200909/090911_a.html
Tocom Launches Trading Simulator
The Tokyo Commodity Exchange launched a virtual trading system called Tocom-VTrade to help market participants become more familiar with the capabilities of the exchange’s new trading system, which is quite different from the previous system. The platform includes free training software that allows public access to a simulated trading environment, which can be used by brokers to train staff or individual traders to learn the new system.
http://www.tocom.or.jp/news/2009/20090728TOCOM-VTrade.html
Singapore
Chi-X Global and SGX Partner for Dark Pool
SGX announced in a press release August 12 that it will partner with Chi-X Global to develop and launch the first exchange-backed dark pool in the Asia-Pacific region. The non-displayed trading platform aims to initially offer block crossing facilities for equities listed on the SGX, and on an offshore basis for Australia, Hong Kong and Japanese exchanges. The launch is planned for the first half of 2010.
http://www.sgx.com/wps/portal/marketplace/mp-en/home
SGX Seeks Public Comments on Fuel Oil Contract Specs
In a Sept. 7 news release, SGX invited public comments on its proposed contracts specifications for fuel oil (FO 380 contract). The contract will be traded in units of 100 tonnes per contract and will be physically deliverable at designated installations in Singapore. The exchange made available details on delivery facilities, margins, and delivery terms. http://www.sgx.com/wps/wcm/connect/cp_en/site/press_room/news_releases/sgx+seeks+public+comments+on+proposed+contract+specifications+of+fuel+oil+futures+contract?presentationtemplate=design_lib/PT_Printer_Friendly
Thailand
TFEX Volume Decline Likely, Bond Futures Next Year
Bloomberg on Sept. 4 quoted the head of the Thailand Futures Exchange as saying that futures volume is likely to fall during the rest of the year because renewed confidence in the stock market will draw volume into stock trading. The TFEX daily volume averaged 10,678 in the first six months of 2009, helped by a record 16,542 ADV in June, said Kesara Manchusree, managing director of the futures exchange. July and August volume tapered off to 15,001 and 12,205. The second half is likely to see a modest decline to around 10,000, she said. Manchusree also said the exchange would list bond futures in the middle of 2010.
http://www.bloomberg.com/apps/news?pid=20601080&sid=aw4mKfCHcNyY
Other Asia-Pac
ASEAN Exchange Add Viet Nam to Regional Agreement
Five ASEAN exchanges—Bursa Malaysia, the Indonesia Stock Exchange, the Philippine Stock Exchange, Singapore Exchange, and the Stock Exchange of Thailand entered added the Hochiminh Stock Exchange to a regional pact signed earlier this year to explore cross border trading among the ASEAN capital markets via an electronic gateway according to a Sept. 15 press release.
CLSA Investors Forum
CLSA issued a press release announcing that it would host former Governor of Alaska and Republican vice-presidential candidate Sarah Palin at their Investor’ Forum being held in Hong Kong September 21-25. This will be the 16th annual CLSA Investors’ Forum and will feature a number of other prominent speakers, including Niall Ferguson, Harvard professor and author of The Ascent of Money, Satyajit Das, author of Traders, Guns and Money, and others.
https://www.clsa.com/corporate-access/investor-forums.php
J.P. Morgan, BofA, Citi Beef Up Asia Commodities Team
Reuters reported Sept. 2 that J.P. Morgan Chase announced the hiring of seven new staff for its commodities and energy sales and trading team. The bank said Justin Hyde was appointed executive director and head of Asia investor sales and structuring. Hyde was previously at Barclays. The announcement came a day after Bank of America announced an expansion of its commodities senior staff by five. The Reuters article said these hirings tended to support anecdotal evidence that more active hiring had started following the turmoil and layoffs of the past two years. JPMorgan has expanded its Asia-based personnel by 30% over the past 12 months, the article said. Asia is increasingly seen as a promising area in part because of increased regulation and tighter restrictions on commodity trading in the U.S., according to the article. The Wall Street Journal reported Sept. 1 that Citi’s CEO Vikram Pandit said that Citi’s Asian commodities team would grow in the “double digits.”
http://www.reuters.com/article/marketsNews/idUSSIN1118920090902
http://online.wsj.com/article/SB125174103426973169.html
ASX Shifts Gears on Environmental Products
ASX’s plans to launch carbon emission futures took a blow in August when Australia’s parliament rejected the government’s plans for an emissions trading scheme. The government pledged to try again to pass the legislation in December. Robert Elstone, the exchange’s chief executive, said the exchange would list carbon-emission derivatives as soon as the legislation is passed.
Meanwhile, ASX said it would establish a derivatives market for renewable energy by the end of the year in the form of futures and options on renewable energy certificates, Reuters reported Sept. 17. RECs are a form of currency that can be earned by installing solar panels, wind turbines and other “green” technology. ASX will face competition from an affiliate of the Climate Exchange, enVex, which is planning to launch a suite of environmental futures products. http://www.reuters.com/article/environmentNews/idUSTRE57B62720090813
http://uk.reuters.com/article/idUKWNAS718920090820
http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSSP53326920090917
http://www.asx.com.au/products/futures/recs/index.htm
Startup Indonesian Exchange Selects Patsystems for Trading Technology
Patsystems announced in a Sept. 8 press release that Indonesia Commodity and Derivatives Exchange selected Patsystems as its technology provider. ICDX was set up earlier this year by commodity trading firms that want to establish an Indonesian benchmark for palm oil prices and is expected to begin operating later this year. The technology package will include the trade matching engine, clearing and settlement platform, pre-trade risk management and the front-end execution platform.
http://www.patsystems.com/news.asp?newsid=139&menuname=News&menu=sub&view=yes&pageid=26&submenuid=26&menuid=22&archive=
FIA Asia News
Mark Your Calendars -- Most Important Asian Derivatives Conference of the Year
The Fifth Annual FIA Asia Derivatives Conference takes place in Singapore Dec. 2-4 at the St. Regis Hotel. For details of the year’s most significant Asian derivatives conference, go here: http://www.futuresindustry.org/asia-2009.asp
