FIA Asia eMarketBeat
Futures Industry Association Asia
Volume 03, Number 2

April 15, 2010

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

Top Stories

FIA Asia Seminar with Beijing Futures Association on April 17
FIA Asia is holding a joint seminar with the Beijing Futures Association on April 17. CME Group Chairman Emeritus Leo Melamed will give a keynote address, and CME officials will give presentations on equity futures and managed futures and host a reception and dinner. Other speakers include senior Chinese policy makers, institutional investors, local futures brokers and technology companies. The event will take place one day following the launch of China’s CSI 300 stock index futures contract (see below) and will be a unique opportunity to network with key participants in China’s futures industry. To register, contact Jane Zhang at zhangxiaojing@ccidexpo.com. FIA Asia members get a 25% discount off the regular registration fee of RMB 1500.
Click Here for More Information

China to Launch Stock Index Futures in Mid-April
The China Financial Futures Exchange is scheduled to begin trading the CSI 300 stock index futures on April 16, the exchange announced on March 26. For more information about the new contract, the March issue of Futures Industry has an article describing the contract’s specifications, the exchange’s rules and China’s fund management industry.
Click Here for CFFEX Announcement
Click here for FI article

Eurex/KRX Link Set for August 30 Launch
Eurex and KRX issued a joint press release on March 10 announcing an August 30 launch for the Eurex/KRX Link. The Link will provide market participants with trading and hedging in the Kospi 200 Options, the most heavily traded options contract in the world, after Korean trading hours.
Click Here for Press Release

New Regulatory Officials in Singapore, Hong Kong and Sydney
The Monetary Authority of Singapore has put in place a new organizational structure that will affect the supervision of financial institutions and markets. Teo Swee Lian, deputy managing director, will oversee financial supervision. Reporting to her are Lee Boon Ngiap, assistant managing director, banking & insurance group, overseeing banking, insurance and complex institutions; Leo Mun Wai, assistant managing director, capital markets group, overseeing capital markets and intermediaries; and Andrew Khoo, assistant managing director, policy, risk & surveillance group, overseeing specialist risk macroeconomic surveillance and supervisory policy.

Hong Kong Exchanges and Clearing appointed Christine Wong to succeed Mary Kao as head of legal services and chief counsel upon Kao’s retirement on July 31. Wong, who will join HKEx on June 10, has more than 20 years experience in the legal and regulatory field. She is currently a consultant at Linklaters and prior to that she was senior director of corporate finance at the Securities and Futures Commission.

ASX Group announced that Peter Hiom will assume the role of deputy chief executive officer in April in addition to his existing responsibilities as the head of business development. Colin Scully will retire as head of operations at the end of November after more than 25 years with the organization. Eric Mayne, head of market supervision, will leave the ASX Group at the end of September, following the government-mandated transfer of certain supervision responsibilities to the Australian Securities and Investments Commission.

China, Hong Kong SAR & Taiwan

CSRC Outlines How Funds Invest in CSI 300 Futures: Asian Investor
The Chinese Securities Regulatory Commission published proposed rules on how Chinese mutual funds can invest in the upcoming CSI 300 index futures, according to a March 18 report by Asian Investor. The draft does not detail how managers will qualify for futures-investing status. Fund houses are advised to review their fund prospectuses and judge whether futures investing would meet their initial investment objective and comport with risk exposure level as promised to investors. Chinese fund managers will be allowed to use futures for “risk management” only, not for return enhancement.
Click Here for Article on CSRC guidelines

Shanghai Shipping Exchange Eyes Container Derivatives: China Daily
Shanghai Shipping Exchange intends to set up a container-shipping derivatives market by the year end, according to a Feb. 26 story in China Daily. The forward freight agreements (FFAs) will be targeted at small and medium-sized exporters as a hedging tool. The exchange will partner with a settlement bank and an electronic-trading systems provider to develop a trading platform. Unlike in the dry-bulk and tanker segments of the shipping business, container-shipping has rarely used FFAs because the variety of cargoes and customers has made rate-tracking problematic. Also, container rates are influenced by more factors than dry-bulk rates, making the development of a reliable index a challenge.
Click here for more information

HKEx Developing New Data Center
Hong Kong Exchanges and Clearing announced on Feb. 22 that it will start implementing a plan for a new data center that will consolidate all of its market and clearinghouse systems. HKEx has received approval to buy an 11,000 square meter site (118,000 square feet) for the planned three-floor building. The exchange said the new building will house the primary data centers for all of its markets and clearinghouse systems as well as certain IT development and support staff. The new data center will begin serving the exchange’s securities markets in mid-2012 and its derivatives markets and clearinghouses in mid-2013. HKEx currently has primary data centers in two separate locations in Hong Kong and backup centers in three other locations in the city.
Click Here for Press Release

HKEx May List Yuan-Denominated Products
Hong Kong Exchanges & Clearing Ltd. will offer Chinese Yuan-denominated bonds and derivatives and plans to become a primary channel for investing by Chinese nationals outside China, according to a March 5 Bloomberg story. HKEx seeks to capture opportunities from the “increasing internationalization” of China’s currency while fending off competition from global exchanges, the story said. The HKEx initiatve is part of a three-year plan to capitalize on the opening of the mainland Chinese market and meet head on competition from global and regional exchanges.
Click here for more information

China Loses Top Position as Holder of U.S. Treasuries: WSJ
China slipped to second place among holders of U.S. treasury securities in December behind Japan after holding the top spot for 15 months, according to a Feb. 22 Wall Street Journal story. China was a major net seller of Treasury as its holdings fell over $34 billion to $755 billion in December, the largest monthly drop since 2000. Japan, a net buyer, moved into first place with $769 billion of Treasury holdings in December. The story said the shift was in part an initiative to diversity beyond dollars.
Click here for WSJ article

India

Algorithmic Trade Accounts for a Fifth of Derivatives Volumes on NSE
According to a Feb. 23 Business Standard story, Algorithmic trading has gained substantial volume in India over the past year. The National Stock Exchange has not made the data on algorithmic trading public, but estimates by major brokers quoted in the story ranged from 15%-20% over total volume and is expected to reach 30% by next year.

Click here for more information

BSE to Offer Co-Location Facilities to Its Members

BSE announced on Feb. 27 plans to extend co-location facilities to its members soon. No go-live date for the facilities have yet been announced.

Click here to read the Press Release

Options Volume Higher at NSE: Business Standard
Trading in options in the Indian equity market has gained steady ground in recent months but without boosting brokerage profitability, according to a March 31 report in Business Standard. Options have been a popular investor choice in the recent volatile markets with the National Stock Exchange reporting a jump of nearly 40 percent in index option volume over the past six months. The influx of retail investors has boosted volume but also fueled competition, driving down brokerage rates, the story said.
Click here for more information

Fidelity to sell 2% in MCX to Intel arm, NCDEX Completes Rights Issue
According to a March 8 story in Economic Times, Fidelity Investments, which currently holds around 7% stake in commodity bourse MCX, is divesting around 2% to Intel Capital (Mauritius), the investment arm of chip maker Intel. The sale is a response to a government limit of 5% on foreign ownership of Indian exchanges.

Meanwhile, NCDEX has completed a rights issue to raise its equity capital from Rs 30 crore ($6.7 million) to a minimum of Rs 500 million ($11.19 million) by September-end, as stipulated by the FMC for existing commodity bourses. The issue had been priced at Rs 110 ($ 2.46) a share, at a premium of Rs 100 ($ 2.24). The exchange plans to recruit Delhi-based brokerage firm Jaypee, which can hold up to 25% ownership, as an anchor investor.
Click here for more information

SEBI to Introduce Physical Settlement in Equity Derivatives
According to a March 8 story in Business Standard, after consulting with exchanges the Securities and Exchange Board of India will allow physical settlement in equity derivatives. Market participants said physical settlement would reduce volatility, according to the story. Big price swings triggered circuit breakers and interrupted stock trading on Indian exchanges four times over the past five years. SEBI has yet to decide whether physical delivery will be an optional delivery mechanism or mandatory.
Click here for more information

BSE Moves to New Options Expiration Cycle
According to a Feb. 26 story by Business Standard, the market has not embraced the Bombay Stock Exchange’s switch in January to a mid-month option expiration cycle. The story said the exchange had hoped the earlier expiration would be an attractive alternative to that of its bigger rival, the National Stock Exchange. The story quoted an exchange official saying “traders take time to get used to any new product.”
Click here for more information

Japan

Tokyo Grain Exchange May Adopt Tocom Platform
The Tokyo Commodity Exchange announced in its monthly newsletter that Tocom and Tokyo Grain Exchange have an agreement in principle for TGE to adopt Tocom’s trading and clearing platform, which is based on Nasdaq OMX software. In addition, TGE would get Tocom’s market surveillance system, SMARTS. The target date for TGE’s adoption of the platform is the second half of fiscal year 2010.

Tocom also reported in the newsletter that the Nikkei-Tocom Commodity Index futures contract, which was launched on March 23, traded 3,041 contracts on the first day.
Click Here for Tocom Newsletter

TOCOM to Extend Trading Day to 4 a.m.
Tokyo Commodity Exchange will extend trading hours for the night session to 4:00 a.m. (JST) starting on Sept. 21. The closing time for the night session of the rubber contract will remain 19:00.
Click Here for Details

Singapore

MF Global and Goldman Sachs Become Members of SGX Securities Market
MF Global has become a trading member of the securities market operated by the Singapore Exchange, while Goldman Sachs has become a trading and clearing member of the securities market. The additions bring the total number of SGX securities trading members to 26 and securities clearing members to 26.
Click Here for SGX Press Releases

SGX to List Futures and Futures Options on Euro Stoxx 50
Singapore Exchange and Stoxx, creator of the leading European equity indices, have reached a licensing agreement enabling SGX to list U.S. dollar denominated Euro Stoxx 50 index futures and options on futures, the two companies announced on March 10. SGX plans to begin trading the contracts in the second half of 2010, subject to regulatory approval.
Click Here for Press Release

SGX Seeks Public Comment on Dividend Index Contract
In an April 6 press release SGX invited public feedback on the proposed contract specifications for the SGX Nikkei Dividend Index contract. The index is based on accumulated dividends received by investors of constituent companies of the Nikkei Stock Average over a calendar year.
Click Here for Details

SGX to Offer Nifty Options, Other Indian Index Products
According to a March 10 press release, SGX expects to offer options on the S&P CNX Nifty Index and other Indian index products this year. SGX obtained licensing rights from India Index Services & Products Limited for the flagship Indian stock index, Nifty, as well as the Nifty Junior, CNX 100 and CNX Midcap indices. Since its launch in 2000, the SGX S&P CNX Nifty Futures has grown to be on of SGX’s key Asian equity derivatives products, with over 7 million contracts traded last year. SGX also lists four exchange-traded funds linked to Indian equity indices on its securities market.
Click here for more information

Sicom Gold Deferred Settlement Contract Debuts
Singapore Commodity Exchange's new Gold Deferred Settlement Contract launched on March 30, according to a Sicom press release. The contract is priced as a spot contract with deferred settlement. During the first day of trading, there were continuous bid-ask quotes from market makers throughout the trading hours with spreads ranging between one tick (US$ 0.10) to five ticks (US$ 0.50). The total volume traded for the first day was 11,916 lots and the settlement price was the Gold Market PM Fixing Price at US$1,107 (per troy ounce).
Click here for more information

Sicom to Launch Robusta Coffee Futures on April 22
Sicom will launch a Robusta coffee futures contract on April 22. “South East Asia has grown to become the largest producer and exporter of Robusta coffee,” Jeremy Ang, the exchange’s chief executive officer, said in a press release. “Sicom Coffee is set to play a key role in establishing an Asian benchmark price for Robusta coffee.” Sicom coffee is a physical delivery futures contract traded in 5 metric ton lot sizes. Trading hours will be from 10 a.m. to 12 noon and from 4 p.m. to 11 p.m., covering both Asian and European hours. Delivery will be via warehouse receipts in bonded warehouses in Ho Chi Minh City, Vietnam or Singapore.
Click Here for Details

Asia-Pacific

CME Focus on Asia
CME Group has announced several initiatives to strengthen its linkages with Asian exchanges and create additional opportunities for cross-border trading.
On March 10 CME entered into cross-listing arrangements with the National Stock Exchange. The agreement paves the way for CME to list futures on the S&P CNX Nifty Index, India’s leading benchmark for large companies. In addition, NSE will have the rights to create rupee-denominated futures contracts based on the S&P 500 and the Dow Jones Industrial Average indices.

CME also announced that it will begin trading a dollar-denominated crude palm oil futures contract on May 24, a key part of an agreement with Bursa Malaysia that was finalized in August 2009. Settlement prices at expiration will be based on the Malaysian exchange’s crude palm oil futures contract, the international benchmark for this commodity.

Lastly, on March 18, CME announced expanded trading hours for its dollar-denominated Nikkei 225 futures contract. The contract will be available on Globex nearly 24 hours a day starting on Aug. 12. Currently, the contract is available only while the Japanese equity market is closed.
Click Here for CME/NSE Cross Listing Details
Click Here for Details on Crude Palm Oil Contracts

ASX to Adopt Next Gen Trading Platform from Nasdaq OMX
In a joint press release Feb 18, ASX and Nasdaq OMX announced that the next ASX trading platform, “ASX Trade,” would be powered by the Nasdaq OMX Genium INET trading platform. The new system will reduce latency to an average of 250 microseconds and increase capacity to more than 5 million trades and 500 million order book changes per day. Core functionalities of the existing system, including the ability to trade equities and derivatives on one platform, will be retained. The platform is scheduled for rollout in the fourth quarter of 2010.
Click here for moreformation

ASX Review of Algorithmic Trading and Market Access Arrangements
The Australian Securities Exchange announced the findings of its review of algorithmic trading and market access in a Feb. 8 press release. Begun in July 2009, the review examined the impact and likely growth of algorithmic trading in Australia and identifies ways to meet the various access arrangements to ASX’s markets while adequately managing risks to market integrity. One of the key findings of the ASX review is that algorithmic trading “has not been inherently harmful to market integrity or quality” in Australia. The review identifies areas where ASX will strengthen the operational, technical and supervisory issues that are likely to arise as the growth of algorithmic trading accelerates.
Click here for more information

Thailand’s Futures Trading to Beat Cash Market in Five Years: Bloomberg
According to a March 31 Bloomberg story, Thailand Futures Exchange expects equity derivatives trading to surpass the cash market within five years, due largely to increased hedging demand. Futures and options trading of the SET50 Index and 14 individual equities averaged 6.5 billion baht ($201 million) a day last month, according to the exchange’s web site. That is the highest since the bourse started operating in 2006 and a threefold increase from a year earlier. The exchange received a “no-action” letter exemption from the CFTC allowing U.S. residents to trade the SET 50 futures contract.
Click here for more information

Markit Group Planning an Index on Asian Credit Default Swaps: Bloomberg
According to a March 17 Bloomberg story, Markit Group, the London-based provider of bond and derivatives indices, plans to create a benchmark for credit-default swaps on Asia-Pacific governments. The Markit iTraxx SovX Asia Index may track swaps on the debt of China, Malaysia, Thailand, South Korea, Vietnam, the Philippines, Indonesia, Japan, Australia and New Zealand. Markit’s Asia-Pacific sovereign index may start trading in April.
Click here for more information