FIA Asia eMarketBeat
Futures Industry Association Asia
Volume 03, Number 1
Feb. 16, 2010
Please direct all feedback on the FIA Asia eMarketBeat to Nick Ronalds.


Top Stories

China to Launch Stock Index Futures in the Spring
        China’s State Council, the country’s chief administrative authority, approved stock index futures “in principle” on Jan. 8. Authorities have said it would take at least three months to finalize regulations and other preparations. Once finalized, the new contract will trade on the China Financial Futures Exchange in Shanghai. The index underlying the contract is the CSI 300, which consists of 300 representative large-cap stocks traded in Shanghai and Shenzhen, China’s two equities exchanges.

• Multiplier: 300
• Minimum tick: 1/5 of a point, or 60 yuan
• Margin: 12% of contract value.
• Daily price limit: 10% from previous day’s close except on first day, when the allowable move from opening price will be 20%, and the last day, 20% from previous close. Expiration: third Friday of the contract month
• Contracts listed: two serial and two quarterly months.
• Trading hours: 9:15 a.m. to 11:30 a.m., and 1:00 p.m. to 3:15 p.m., except on last trading day when the close is 3:00 p.m.
   
  

Look for an article on the CSI 300 stock index futures in the March issue of Futures Industry

Merrill Lynch Offers Low-Latency Access to Japanese Exchanges
        Bank of America Merrill Lynch has introduced a third-party hosted service for low-latency electronic trading in Japan. The new platform, which provides access to both cash equities and derivatives exchanges in Japan, reduces trading costs while maintaining connectivity speeds on par with co-location platforms offered to date in Japan, the company said in a Feb. 9 announcement.
        The system allows clients to trade from a data center in Tokyo operated by KVH, a network provider that provides high-speed connectivity to all of Japan’s major exchanges. The other partner in the system is Activ Financial, which provides low-latency market data. The system is broker-neutral, meaning that users can access multiple exchanges from a single location by selecting brokers that hold the required exchange memberships, Merrill Lynch said.
        “Traders who employ high-frequency strategies using cash and derivatives—be they futures or options—have shown huge interest,” said Mark Wheatley, managing director of Asia Pacific electronic trading and head of Japan equities at Merrill Lynch. “In today’s environment where clients are seeking to minimize counterparty risk by trading with multiple brokers, this solution makes even more sense. Users have complete freedom to choose which brokers to route through, all from one location and for a very competitive price.”
        Click Here for Press Release

ASEAN Exchanges Select NYSE Technologies to Build Order Routing Network
        Four leading ASEAN equities exchanges—Bursa Malaysia, the Philippine Stock Exchange, the Singapore Exchange, and the Stock Exchange of Thailand—have selected NYSE Technologies to develop an order routing network to link their markets, according to press releases issued Feb. 8 by NYSE Technologies and the participating exchanges. When completed, the ASEAN Trading Link will electronically interconnect the four exchanges to allow cross-border order routing and trading. Brokers and their clients in one country will get access to the markets of the three others. The network will provide market data and risk management functionalities in addition to a trading platform. Exchange sources said the network would start by linking the cash markets but that futures, options, and other derivatives could be added at a later stage. No completion date for the network was announced.
        Click Here for Press Release

China, Hong Kong SAR & Taiwan

HKEx Introduces Flexible Index Options
        HKEx launched flexible index options Feb. 8 to expand the coverage of over-the-counter contracts by its derivatives market’s block trade facility. Flexible index options comprise Hang Seng Index and H-shares Index options contracts with customized strike prices and expiry months which must be executed through the block trade facility. Each series will be created by HKEx upon the request of an exchange participant.
        Click Here for More Information


New CEO Takes Office at HKEx
        Charles Li (Chinese given name “Xiaojia”) began his tenure as chief executive of HKEx on Jan. 16. His most recent prior position was chairman of JP Morgan China. Li succeeds Paul Chow, who is retiring but will become an ex-officio member of the exchange's board.
        Click Here for More Information

HKEx Derivatives Market Transaction Survey
        HKEx conducted a survey of its users in late 2009, the latest in a series of surveys begun in 1994, and issued its finding in a press release. Among other statistics the study reported that retail investors contributed 23% of total market turnover, vs. 24% for institutional investors and; and that UK investors made up the largest proportion of overseas investor trading at 29%, followed by U.S. investors at 19%. during the study period. The full report on the HKEx Derivatives Market Transaction Survey 2008/09 is available on the HKEx website at:
        Click Here for Full Report
        Click here for Press Release
 
UBS to Apply for More QFII quotas, Reuters Reports
        UBS will soon apply for expanded quotas to invest in China’s capital markets under new regulations issued last year, according to a Jan. 18 Reuters story. The firm already has the biggest quota allocation of any institution, $800 million. The China Securities Regulatory Commission issued new rules last year that would qualify UBS for another $200 million, the story said. Nicole Yuen, managing director and head of China equities at UBS, was quoted as saying the firm would submit a quota application soon, adding that UBS was optimistic over prospects for China’s stock market. The imminent launch of a stock index futures contract and new rules to allow short selling played a role in the decision. The new CSRC rules prohibit QFIIs from lending their quota allocation to clients, a practice that had been common. After last year’s quota increase of $3.3 billion, the total for all QFII allocations now stands at $16.7 billion.
        Click Here for News Report
 
Citic Newedge to Double Staff on China Stock Futures, Bloomberg Reports
        According to a Feb. 9 Bloomberg story, Citic Newedge Futures, the joint venture between China’s Citic Group and Newedge, plans to almost double its staff in China by the end of this year to prepare for the increased business from the introduction of the CSI 300 stock index futures, according to a Bloomberg News article. The Bloomberg report, based on an interview with Dean Owen, the Shanghai-based chief representative for Newedge, said the company would add 50 staff to the 60 it already has there and open a second branch in Shanghai. About half the new hires will be working in equity futures and related tasks, such as analysis and risk control.
        Click Here for News Report

India

NSE and MCX-SX Launch New Currency Futures
        The Securities and Exchange Board of India in mid-January allowed stock exchanges to introduce futures in three additional currencies—the euro, yen and pound. Futures on the U.S. dollar/rupee exchange rate were introduced in August 2008. Two exchanges—the National Stock Exchange and MCX-SX, the securities exchange affiliate of Multi Commodity Exchange, listed the three new contracts on Feb. 1. The contracts are cash-settled in rupees with a maximum maturity of 12 months.
        Click Here for More Information
        Click Here for Press Release

Indian Exchanges to Introduce Co-Location, Financial Times Reports
        India’s stock exchanges are planning to introduce co-location facilities as algorithmic trading catches on, according to a Jan. 11 Financial Times story. The Bombay Stock Exchange, India’s second largest market by volume, announced in early January that it was teaming up with Netmagic Solutions, an information technology company, to provide co-lo services. The National Stock Exchange, India’s largest market by volume, said it would be going live with co-location shortly. Competition among exchanges in India has been increasing, the story said, with several new equities markets getting licenses recently.
        Click Here for News Report

Indian Regulator Studying Currency Options, Business Standard Reports
        The Securities and Exchange board of India and Reserve Bank of India have been soliciting feedback from local exchanges on the possible introduction on currency options, according to a Feb. 12 article in the Business Standard. Madhusuman Somani, director financial markets, Yes Bank, was quoted as saying, options will help entities hedge against currency volatility while limiting the downside. However, the article noted that the RBI appeared to be skeptical about currency options and feared they would increase volatility in the underlying currencies. Currency futures are being traded at the NSE and the securities affiliate of MCX, called MCX-SX. Foreign institutional investors are not permitted to trade these contracts.
        Click Here for News Report

Japan

Tocom to Extend Night Trading Hours in September
        Tokyo Commodity Exchange announced on Feb. 16 that it plans to extend trading hours for its night session until 4:30 a.m. (JST) beginning Sept. 21. Currently, Tocom’s trading hours are from 5:00 p.m. to 11:00 p.m. for the night session and from 9:00 a.m. to 3:30 p.m. for the day session. Trading hours for the rubber futures contract will not be changed. Tocom set the closing time of the night session to coincide with the closing of New York crude oil floor trading. The exchange said it decided to extend the trading session beyond 11:00 p.m. because the overlap in trading hours with the New York market could greatly benefit arbitrage traders. In addition, the dollar-yen exchange rate, which is thought to be one of the factors causing increased gold trading volumes, tends to fluctuate around that time, the exchange said.
        Click Here for Press Release

CFTC Okays SGX Mini Nikkei Futures Sale in U.S.
        The Commodity Futures Trading Commission on Dec. 29 announced it had issued a so-called no-action letter effectively paving the way for the offer and sale of Singapore Exchange’s mini Nikkei 225 futures contract. The CFTC gave its approval to trade the SGX products through a registered futures commission merchant. The contract is based on the Nikkei 225 stock index, which comprises actively traded and highly capitalized stocks listed on the Tokyo Stock Exchange.
        Click Here for More Information


OSE Open to Global Alliances, Financial Times Reports
         The OSE is open to forming international alliances to become more globally competitive, according to a Jan. 26 story in the Financial Times. The exchange signed a Memorandum of Understanding with the CME last year, but no concrete developments from that relationship have been announced. In 2011 the OSE will introduce a new derivatives platform developed by Nasdaq OMX. The article said that Michio Yoneda, the president of the OSE, has said his goal is to double the exchange’s annual volume from the current 163 million. The OSE is the world’ 15th largest exchange based on 2009 volume, the article said, compared to third in the early 1990s. Yoneda said Japan’s derivatives trading volume was low compared to the size of the Japanese economy. The article quoted an OSE director, Kotaro Yamazawa, as saying there was potential for alliances for product development with U.S.-based players in exchange for distribution in Japan. It recently introduced a remote membership category to promote offshore participation in its markets, the article said.
        Click Here for News Report


Japan May Require Offshore Clearing for OTC Derivatives, Bloomberg Reports
        Japan’s regulator, the Financial Services Agency, may require derivatives traders to clear OTC trades with offshore centralized clearinghouses to increase transparency, according to a Jan. 22 Bloomberg story. The regulator is considering whether derivatives such as swaps should be cleared in domestic clearinghouses, whether domestic clearinghouses should be linked to foreign ones, or cleared in overseas clearinghouses.
        Click Here for News Report

Tocom Becomes First Japanese Exchange to Allow Block Trading, Automated Trader Reports
         The Tokyo Commodity Exchange has introduced a block trading facility, becoming the first Japanese exchange to introduce block trading, according to a Feb 4 article in Automated Trader. The story said the exchange had been receiving numerous requests from investors involved in investment funds and ETFs to introduce the capability.
        Click Here for News Report


Tocom’s January Newsletter:
        http://www.tocom.or.jp/data/geppou/gaikyo201001_e.pdf

Korea

Newedge Wins Full Futures License in Korea
        Newedge announced on Jan. 6 that it has received a “full futures license” from the Korea Financial Services Commission. This will allow the company’s Korean office to offer all products listed on the Korea Exchange, including stock index futures and options, interest rate, currency and commodity products and cash equities. In addition, Newedge Korea is now allowed to offer offshore futures and options products to domestic clients.
        Click Here for Press Release
 

Korean Plan Would Tax Listed Derivatives, Possibly Crimp OTC Market, Bloomberg Reports
        South Korea’s plans to strengthen control over derivatives will damage trading and crimp growth of the market, the head of Newedge Group’s South Korean unit, Kevin Lee, said in a Bloomberg article. Lee’s comments come as the Korean legislature is considering a tax to raise revenue and curb speculation, the story said. Lee said such a tax would force many investors to leave the market and drive down volume. Korean legislators wrote a bill in a subcommittee in December that calls for a tax of 0.01% on futures and options trading starting in 2013.The bill needs approval from another committee before being submitted to the plenary session for vote. A separate bill would force banks to get approval before selling new types of OTC derivatives. The Foreign Bankers Group in Seoul said such a requirement would paralyze product development, according to the article.
         Click Here for News Report

Singapore

SGX launches SGX Algo School with Partner
        SGX and the Association for Financial and Commodity Traders jointly opened SGX Academy Algorithmic Trading in December. The initiative will feature hands-on workshops with expert-level trainers using a live training facility at SGX. The program, which is supported by the financial training scheme administered by the Monetary Authority of Singapore, will be rolled out to sophisticated retail investors later on. RTS Realtime Systems is the vendor partner in this program supporting the training and infrastructure setup.
        Click Here for More Information

SGX Extended Derivatives Trading Hours to 1:00 A.M.
        The Singapore Exchange extended the trading hours on Jan. 11, for its equity index futures and options contracts sessions by an extra hour to 1:00 a.m. Singapore time (GMT +8) to accommodate international demand for these products. The affected contracts include the SGX Nikkei 225, SGX MSCI Taiwan, SGX MSCI Singapore and SGX S&P CNX Nifty index futures. “With the longer hours, traders [can] respond to market movements and manage their risk on SGX across global time zones, including after the close of European equity markets,” said Janice Kan, senior vice president and head of product development at SGX.

Other Asia

Thailand Futures Exchange Expects to Grow 20% in 2010
         Thailand Futures Exchange said in a press release in January that 2009 trading volume was 3.075 million contracts, or a daily average of 12,771 contracts, an increase of over 44% from 2008. TFEX expects that in 2010, it can grow 20% “by focusing on increasing liquidity of existing products and encouraging the launch of interest rate futures within this year.”
        Click Here for Press Release

LME to Open Singapore Office in April, Energy Risk reports
         The London Metal Exchange announced it would open an office in Singapore in April, according to a Feb. 10 story in Energy Risk. The story quoted Liz Milan, LME managing director, as saying an office in Singapore is necessary to support LME members, most of whom have a presence there. The article quoted sources saying Asia accounts for a growing proportion of metal consumption. In addition, a Singapore presence will give LME easier access to new Asian customers, the source was quoted as saying. The growing importance of China and China’s futures markets were also noted.
        Click Here for News Article

Dubai International Financial Center Hosts Meeting on Islamic Finance
        The Dubai International Financial Center announced on Dec. 29 that it hosted a meeting of the Shari’ah Advisory panel of the International Islamic Financial market to obtain guidance from scholars and to explain the benefits of its Tahawwut (hedging) master agreement. This agreement, developed jointly with the International Swaps and Derivatives Association, provides a framework and mechanism on hedging and risk management transactions that can be undertaken by the Islamic finance industry.
        Click here for More Details

FIA Asia News

FIA Asia Elects New Directors
        In its annual election Dec. 14, FIA Asia re-elected four directors and elected two new directors: Kesara Manchusree, Thailand Futures Exchange; Jason Scott, Credit Suisse; Ramamurthy Sundararaman, National Stock Exchange of India; John Bird, CLSA Singapore; Foo-Shiung Ho, Yuanta Futures; Peter Lewis, MF Global. They join four directors whose terms expire at the end of 2010: Nicholas Forgan, JP Morgan Securities Singapore; Paul Davies, Goldman Sachs Futures Pte Ltd; Rama Pillai, SGX; and Toby Lawson, Newedge Group. John Damgard, President of the FIA, and Nick Ronalds, Executive Director of FIA Asia, are ex-officio directors with vote.
 
Mark Your Calendars: FIA Asia and Beijing Futures Association Hold Joint Seminar April 17
        FI Asia and the Beijing Futures Association are jointly hosting, for the second year in a row, a one-day seminar April 17 at the Presidential Hotel Beijing. Speakers will include local and foreign experts on stock indexes and specifically, the CSI 300 contract; managed futures; and developments in China’s futures industry.
        Who should go: Financial industry professionals interested in learning more about China’s futures markets and in networking with Chinese brokers and investors.
        Who will speak: Senior Chinese regulators, expert foreign and Chinese speakers expert on Chinese markets and products.
        Where it is: the Presidential Hotel, Xicheng District, Beijing, 100037 China
        Click Here for More Information and to Register