China Stock Index Futures Launch: Around the Corner?
Several Chinese officials have indicated in public comments that preparations for the launch of stock index futures are nearly complete. At the same time, however, some officials have expressed concerns about the potential impact on the stock market, creating uncertainty about the timing of the launch.
In the November issue of its monthly newsletter “China Futures Market,” Haifu Futures, a Chinese futures brokerage, quotes Shang Fulin, chairman of the China Securities Regulatory Commission, as saying at a Beijing derivatives conference in October that the country “has basically completed system and technical preparations for the launch of its stock index futures,” but that the CSRC needed to complete “final preparations.”
At the same conference a vice chairman of the Standing Committee of the National People’s Congress said stock index futures would help China “better handle” risk but added that the threshold for participation should be set relatively high to “avoid irrational investors.”
Reuters reported Nov. 1 that Zhou Qinye, executive vice president of the Shanghai Stock Exchange, said at the same conference that introduction of futures might “increase selling pressure on the cash market.” He added that the Chinese equity market was too “immature” to allow a margin (collateral) level of less than 10%, as some have suggested.
A number of reports from China-based news outlets in recent months have suggested that before allowing the launch of stock index futures Chinese authorities may implement measures to dampen exuberance in the stock market. Interest rate hikes may be supplemented by additional administrative restraints, it has been suggested.
According to a report in China Daily, an official of the CSRC said that half of all Chinese futures brokers are now owned by securities firms, compared to only 10% a year ago. In China, futures and securities brokerage may not be housed within the same company. Hence securities firms are buying futures brokers to get access to the financial futures business.

Chinese Bank Gets Nod for U.S. Branch: First Since 1991
The Federal Reserve approved an application from China Merchants Bank, China’s sixth largest bank by assets, to open a branch in New York, according to a report in the Wall Street Journal on Nov. 11.
China’s largest bank, Industrial & Commercial Bank of China, has an application pending with the Fed and hopes for approval soon, the WSJ reported. Chinese banks seek to expand internationally both to serve their existing Chinese clients and to prepare for the liberalization of China’s foreign exchange and money markets.
The approval of CMB represents a breakthrough for Chinese banks. Thus far U.S. regulators have declined to license new Chinese banks since implementing foreign bank supervision laws in 1991. This impasse had become a regular complaint on the part of Chinese authorities in reply to U.S. requests for increased market access in China. Bank of China and Bank of Communications are the only Chinese banks with U.S. branches, both of which predated the 1991 tightening of standards.
Access to China’s financial markets has been a central topic in the so-called “Strategic Economic Dialogue” between the U.S. and Chinese governments. The next round of the SED is scheduled for December. The WSJ quoted David Loevinger, U.S. Treasury attaché in Beijing, as saying that the U.S. will encourage further Chinese opening to foreign competition in its financial sector in the December round of the SED. Foreign ownership in Chinese banks is currently limited to 25% total, and 20% by any single investor.
http://online.wsj.com/article/SB119477480470489253.html (subscription required)

Taiwan’s FSC Lobbies for Consolidation of Nation’s Exchanges
The head of Taiwan’s financial regulatory agency has urged the legislature to approve a proposed consolidation of the nation’s exchanges into a single holding company. According to a Nov. 10 report in the Taipei Times, Financial Supervisory Commission Chairman Hu Sheng-Cheng said “financial reform cannot wait” and urged the legislature to accelerate the timetable for the proposed consolidation. Under the government’s proposal, the Taiwan Futures Exchange will be combined with the Taiwan Stock Exchange, the Taiwan Depository and Clearing Corp. and the GreTai Securities Trading Co., which handles the trading of bonds. At a later phase, the holding company will list its shares and set up an independent unit to handle market supervision. The government has approved the plan, but some members of the legislature are questioning the shareholder structure of the proposed holding company, the article said.
In related news, Dow Jones reported on Nov. 19 that the Taiwan Stock Exchange is in “preliminary talks” to sell up to 25% of its equity to a foreign exchange. The story named Deutsche Boerse, Nasdaq and NYSE Euronext as possible alliance partners. The sale, if agreed, would not take place until after the proposed consolidation of Taiwan’s exchanges, the story said.
http://www.taipeitimes.com/News/biz/archives/2007/11/10/2003387141

Hong Kong’s SFC Considers Easing Position Limits on Futures and Options
The Hong Kong Exchanges is seeking regulatory approval to ease its position limits rules, making it possible for market participants to take larger positions if they meet certain requirements. According to a Nov. 1 circular, the exchange has asked the Securities and Futures Commission to allow exchange participants or their affiliates to hold futures or options contracts in excess of the prescribed limit if they can satisfy the SFC that 1) there is a “business need” for the excess position and 2) they have “adequate financial capability and internal control procedures and risk management systems” to manage the risks of the excess position. The proposed amendment is scheduled to take effect on Dec. 21. HKEx has advised market participants that futures and options on the Hang Seng Index and the Hang Seng China Enterprises Index are likely to be the first contracts subject to the new policy, with an allowable excess of up to 50% of the existing position limit.
http://www.hkex.com.hk/partcir/hkfe/dmd/DMD_354_07_e.pdf

India’s Sebi Approves New Types of Futures and Options
To encourage derivatives trading to move onshore, the Securities and Exchange Board of India has approved the introduction of new types of futures and options, according to a Nov. 14 press release. These products include mini-contracts on equity indices, currency futures and options, volatility futures and options, bond index futures and options, options with longer life, and options on futures. “It is expected that these new derivative products will provide investors with a larger range of risk mitigation products and create more activity in the Indian onshore markets,” Sebi said. “These products are also expected to bring transactions based on private synthetic products to an exchange-traded transparent mechanism with appropriate regulatory supervision.”
http://www.sebi.gov.in/Index.jsp?contentDisp=SubSection&sec_id=25&sub_sec_id=25

Korea Exchange to List Kospi 200 Futures on CME’s Globex Platform in Early 2008
The CME Group and Korea Exchange announced an agreement in late October under which the KRX’s Kospi 200 futures contract will be listed on CME’s Globex electronic trading platform starting in early 2008. The deal, which has not yet been finalized, will be KRX’s first for its Kospi product. The trading arrangement does not cover the option on the Kospi index, however, which is the world’s most actively traded equity index option.
The Kospi index is a capitalization-weighted index of the 200 largest companies listed on the Korean exchange. Under the deal, trades will be matched on Globex but cleared and settled on KRX.
The contract will trade from 2:00 a.m. to 3:00 p.m. Chicago time, or 5:00 p.m. to 6:00 a.m. Seoul time. The Kospi 200 will trade on Globex side by side with CME’s futures products on the system. CME officials were quoted in the release as saying the deal was a “prime example of how the CME Group is further extending its reach into the Asia marketplace” and “and important part of our continued global expansion.”
http://cmegroup.mediaroom.com/index.php?s=43&item=643

SGX to Launch Single Stock Derivatives in the First Quarter of Next Year
Singapore Exchange is planning to introduce “single stock derivatives” in the first quarter of 2008 and is seeking public comment on the necessary changes to its business rules, the exchange announced on Oct. 25. The contracts will have a length of two months and will enable investors to buy into an underlying stock at an agreed price on the day of the trade. The contracts will settle with the delivery of the underlying stock at the end of the two-month cycle. The contracts will be traded on the exchange’s securities market rather than its derivatives market.
http://info.sgx.com/webnewscentre.nsf/b9c790d0d5ba5d2548256dcf0049ce28/48256838002f07b14825737f0019e0bf?OpenDocument

CQG and Calyon Financial Announce Order-Routing Partnership in Asia
CQG, a financial information provider and order-routing firm, and Calyon Financial, the brokerage firm subsidiary of Credit Agricole, announced on Nov. 12 a partnership to provide their clients with improved access to nine Asian futures exchanges. The deal calls for a combination of CGQ’s front end and Calyon’s gateway system. This will allow customers to use CQG’s platforms to trade futures on exchanges in Hong Kong, Japan, Korea, Singapore and Taiwan.
http://www.cqg.com/Docs/CQG_Calyon.pdf

MF Global Discusses Asia Expansion Strategy
Kevin Davis, the chief executive officer of MF Global, discussed his firm’s strategic focus on the Asia-Pacific region in a lengthy interview with Finance Asia. In the interview, Davis said MF Global is now the top executing broker at the Sydney Futures Exchange following its acquisition of BrokerOne. MF Global is actively looking to make other acquisitions across the region, he said, adding that the acquisition target “must expand our geographic presence, enhance our product offering and/or improve our market position.” Davis also said that MF Global sees rapid growth in demand for non-traditional products such as online foreign exchange trading and contracts for differences.
http://www.financeasia.com/article.aspx?CIaNID=64851 (subscription required)

2. GREATER CHINA NEWS

China’s QDII Program Surpasses $42.2 Billion
Haifu Futures notes in the November issue of its newsletter that the total value of funds going overseas as part of the qualified domestic institutional investors program had reached US$42.2 billion. The QDII program was launched in July, and now has 40 institutional participants: 21 commercial banks (US$16.1 billion), 14 insurance companies (US$6.6 billion), and five fund management companies (US$19.5 billion).

China Pension Fund Market to Open to Foreign Fund Managers
Bloomberg reported an announcement by the Chinese Labor Ministry that China will issue 20 licenses to domestic and foreign fund managers by the end of 2007 to manage China’s pension fund market, which is estimated to have 90 billion yuan (about US$20 billion) in assets under management. Tan Jison, a Labor Ministry official, said China would “welcome foreign firms in the market.” (See following story on the projected growth of China’s pension fund market.)
China’s deputy labor minister had said in April that the government would transfer over 70 billion yuan in pension plan assets to professional fund managers by the end of the year. The 20 licenses will include asset managers but also trustees, account administrators and custodians. Each of these roles requires a separate license.
http://www.iht.com/articles/2007/09/09/bloomberg/bxyuan.php

McKinsey Study Predicts Surge in China Assets under Management
In a study published in October, “The Opportunity in Asset Management in China,” McKinsey & Co. estimate that assets in China’s asset management industry will grow 26% annually for the next decade, making it “the fastest-growing segment of financial services in China and the world.”
Two sources will account for the growth—retail demand and pension-related assets. However, the study warns that rapid growth notwithstanding, competition will be fierce and profitability a struggle. The study points to the common practice among Chinese investors to switch funds frequently. Further, the relatively small number of listed companies makes it a challenge for asset managers to differentiate themselves.
The study also warns that major improvements in the underlying capital markets are needed to support future growth. The number and variety of listings will need to increase. Restrictions on the issuance of funds, now quite stringent, will have to be loosened. Also, China still lacks the risk management tools, such as futures and other derivatives, available to asset managers in most other markets.
Foreign asset managers’ experience and track record elsewhere will be no guarantee of success in the promising Chinese market, according to the study. Local asset managers have demonstrated by their recent success their ability to create successful products. Differences in culture, compliance and other regulatory practices, and constraints in distribution channels are barriers to foreign asset managers accustomed to the more established markets.
The study notes that the public is interested in education programs and is willing to pay for good ones.
http://www.mckinseyquarterly.com/The_opportunity_in_asset_management_in_China_2060 (membership required for full article.)

Mark Mobius Calls Chinese Market Valuations “Excessive”
In an interview posted on the Franklin Templeton web site, Mark Mobius, the famed portfolio manager and emerging markets guru who managed the first emerging market fund available to U.S. investors, characterized the Chinese market as overvalued but cautioned that no one can predict when a market has peaked and “this situation of expensive valuations could last longer than most could expect.” He compared the Chinese market, especially the “A” share market, to that of Japan in the 1980s, when the market soared “for much longer than outside observers believed possible.”
Regarding China’s economy, Mobius said China compares favorably to other emerging markets because of the growth in trade since its accession into the World Trade Organization and its huge population. Though he expects a market correction at some point, he did not expect a “financial crisis” and does not believe there will be significant economic policy changes following the National Party Congress.
http://www.franklintempleton.co.za/jsp_cm/news/pdf/QA_MM_China.pdf

China Puts the Brakes on “Through-Train” Scheme
Bloomberg reported that the Chinese government is taking a cautious approach to a proposal to allow individual investors to trade securities on the Hong Kong Exchanges as a means to introduce an orderly outflow of capital. The plan, which has been called the “through train” scheme, was announced on Aug. 20 by the State Administration of Foreign Exchange, which manages the country’s US$1.33 trillion in foreign exchange reserves. The scheme would apply not only to stocks but also other products traded on HKEx, including options and futures, according to legal experts.
Despite initial enthusiasm, Prime Minister Wen Jiabao of China reportedly said in early November that certain conditions should be met before the scheme could be implemented. In particular, the government needed to study the risks, increase knowledge among Chinese investors and prepare regulations to protect the stock markets in Hong Kong and at home, according to a report in the South China Morning Post. China “should make scientific judgment and analysis on what impact the massive funds flooding into Hong Kong financial market would have,” Wen said during a trip to Uzbekistan, according to the Post. http://www.bloomberg.com/apps/news?pid=20601087&sid=akONJHOgR8mY&refer=home

Dalian Commodity Exchange Launches Palm Oil Futures
The Dalian Commodity Exchange launched physical delivery palm oil futures on Oct. 29. Margins are set at 5% of value, and the daily price limit 8%. On the first day of trading, five out of the six listed contract months were limit up, and the notional value of turnover was 340 million yuan (US$45.8 million), or some 4000 contracts, each worth about 84,000 yuan (US$11,300) based on closing prices. The trading unit of one contract is 10 metric tons and the tick size is two yuan per metric ton.
Detailed contract specifications are available at:
Click here for detailed contract specifications

Hong Kong Government Increases Stake in HKEx
The Wall Street Journal reported in September that the Hong Kong government increased its stake in the Hong Kong Exchanges from just below 5% to 5.88% to provide a confidence boost at a time that China’s mainland bourses are attracting a growing share of listings. According to the story, there is speculation that the Hong Kong government’s stake in HKEx might eventually be swapped for shares in a mainland exchange.
Although Hong Kong shares have been soaring along with those of the mainland, Chinese regulators have been encouraging Chinese companies to raise capital on domestic exchanges. Several of the largest share offerings in 2007 took place in Shanghai. Analysts say the shift could hurt Hong Kong down the road if the city-state doesn’t take defensive measures. The Hong Kong government created an advisory council in 2006, which, among other things, recommended strategic linkages with mainland exchanges.
http://online.wsj.com/article/SB118953824334724067.html (subscription required)

Bear Stearns and Citic Securities Establish Partnership
In October the Wall Street Journal reported on a deal between the Chinese investment bank Citic Securities and Bear Stearns whereby each would buy a $1 billion stake in the other. Citic’s investment buys the firm a 6% share of Bear Stearns, which gets 2% of Citic. Citic also has the right to buy an additional 3.9% in the public market, while Bear Stearns received options for another 5% of Citic, exercisable over five years, the WSJ reported. The deal calls for the two firms to develop new financial products and services for the Chinese market and also create a Hong Kong-based joint venture to provide a range of capital market-related services throughout Asia. Citic is already China’s second largest securities under-writer, with total issuance so far in 2007 of US$10.8 billion for 14 issuing companies.
http://online.wsj.com/article/SB119310360313967944.html?mod=US-Business-News (subscription required)

Barclays in Commodity Partnership with China Development Bank
Barclays has formed a five-year “strategic alliance” with China Development Bank to establish a presence in China’s commodity markets, the bank announced on Oct. 10. Under the terms of the partnership, Barclays will develop commodity products origination and trading capabilities within the Chinese bank and enhance its commodities execution and risk management infrastructure. In return, China Development Bank will appoint Barclays as its “preferred provider of commodity market risk hedging,” Barclays said. The partnership will focus initially on energy, metals and carbon emissions. China Development Bank was established by the Chinese government in 1994 to finance infrastructure development and other national products. In August CDB bought 1.45 billion pounds (US$3 billion) of shares in Barclays, making it one of the largest shareholders in the U.K. banking group. Separately, Reuters quoted Benoit de Vitry, the head of Barclays’ commodity business, as saying that his group currently has three sales staff dedicated to mainland China and this could rise to 15-20 people focused on China within five years.
http://www.barcap.com/sites/v/index.jsp?vgnextoid=50105f5e5f785110VgnVCM1000001413410aRCRD&vgnextchannel=1c6c15cd3f4f8010VgnVCM1000002581c50aRCRD

JPMorgan Considering Securities Joint Venture in China
JPMorgan is looking for a Chinese joint venture partner in the securities industry, the Financial Times reported on Oct. 25. Gaby Abdelnour, chairman and chief executive of JPMorgan Asia Pacific, told the paper that the bank is “looking at opportunities to invest in a Chinese brokerage” but added that the bank is “waiting for clarity” on foreign investment rules “before moving ahead.” The bank said its plans for a securities joint venture were part of its aim of increasing its Asia revenues by more than 40% annually over the next three years. In September, JPMorgan became only the second foreign firm to announce approval by Chinese authorities for the formation of a joint venture in the futures industry. Its partner for that venture will be Zhongshan Futures Co.
A restriction on securities joint ventures has been in place for about a year. To date only UBS, Goldman Sachs, and Morgan Stanley have Chinese joint venture partners in the securities brokerage business. Other firms besides JPMorgan waiting to jump in once the restrictions are lifted include Merrill Lynch, Citigroup, Deutsche Bank, and Credit Suisse, according to the FT story. Regulatory authorities are expected to announce revised guidelines on partnering in the securities industry after the scheduled high-level talks with the U.S. Treasury, the so-called “Strategic Economic Dialogue.”
In related news, a senior regulatory official said China will soon resume accepting applications for securities joint ventures. In comments quoted in China Daily on Oct. 18, Tu Guangshao, vice-chairman of the China Securities Regulatory Commission, said the approval of such institutions was suspended last year due to the restructuring of local securities houses. Tu said that the reshuffle had been basically completed, but did not offer a timetable for action.
http://www.ft.com/cms/s/0/5ec5a59e-8246-11dc-8a8f-0000779fd2ac.html?nclick_check=1
http://www.chinadaily.com.cn/china/2007-10/18/content_6185605.htm

CFETS and ICAP Launch Joint Venture
China Foreign Exchange Trading System and National Interbank Funding Center, an affiliate of China’s central bank known as CFETS, and ICAP, the voice and electronic interdealer broker, have formally launched their joint venture interdealer broking business in China, the two organizations announced on Sept. 13.
The new venture, owned one third by ICAP and two thirds by CFETS, has a staff of 30 and will provide broking services to the money, bond and derivatives markets, initially in yuan and ultimately including foreign currencies. Daily interbank yuan turnover in lending, bond repurchases and spot bond trading is now around 300 billion yuan, roughly double last year's levels, according to Reuters calculations based on CFETS data.
China Daily reported in a separate story Sept. 14 that Tullett Prebon Sitico, a Shanghai-based joint venture between Tullett Prebon and the Shanghai International Trust and Investment Co., was the first money broking company to enter the mainland.
(From a joint press release and China Daily)
http://www.icap.com/news-events/in-the-news.aspx?year=2007

Mainland Ahead of Hong Kong in Warrant Turnover
In just two years since the issuance of the mainland’s first stock warrant, the mainland has surpassed Hong Kong as a market for warrants, China Daily reported. The Shanghai Stock Exchange published statistics showing warrant turnover in the first six months of 2007 at over 2.7 trillion yuan (US$358 billion).
The market got an assist from the relaxing of a rule prohibiting the sale of a warrant on the same day it is bought. However, market insiders say a prohibition on the issuance of covered warrants still limit the potential of the warrant market. Despite the volume of turnover, the number of warrants outstanding is minuscule compared to Hong Kong, with only eight still trading in Shanghai and 13 in Shenzhen. Analysts were reported as saying their scarcity has driven their prices up beyond fundamental value.

3. INDIA NEWS

India Restricts Off-Shore Derivative Instruments
In October, the Securities Exchange Board of India moved to wind down the market for offshore derivative instruments such as Participatory Notes (PNs). Sebi cited concern about the rapid growth of the PNs from 319 billion rupees ($8.2 billion) in 2004 to 3.5 trillion rupees (US$89.5 billion) today, an increase by a factor of eleven, as the reason for their action. The measures include a prohibition on issuing any new ODIs based on futures or options, and a winding down of the existing derivatives-based ODIs over 18 months. The issuance of ODIs based on stocks came under new restrictions. Existing contracts can be rolled over provided maturities do not extend beyond the 18-month deadline. Both the International Swaps & Derivatives Association and Managed Futures Association submitted comment letters to Sebi warning that the measures would be highly disruptive.

Citi and Merrill Buy 5% Stakes in India’s MCX
Citigroup and Merrill Lynch have each bought 5% of Multi Commodity Exchange of India, the largest commodity futures exchange in India. They bought the shares from Financial Technologies, one of the companies that founded the exchange. Fidelity, the U.S. asset management company, already holds a 9% stake in MCX. Goldman Sachs and IntercontinentalExchange hold 7% and 8% stakes, respectively, in the National Commodity Derivatives Exchange, the second largest commodity futures exchange in India. NYSE Euronext owns 5% of the National Stock Exchange of India, the country’s largest financial futures and options exchange.

India’s Central Bank Backs Introduction of Currency Futures
An internal working group appointed by the Reserve Bank of India has recommended introduction of trading in currency futures to help Indian companies better manage currency risk exposures. The working group proposed a detailed framework for establishing a market for currency futures. In particular, the group suggested that trading should be limited to resident entities in the initial phase. Contracts should be cash-settled and should have a notional value of $1,000, and contract specifications should be the same across all exchanges that list the contracts for trading, the working group recommended.
http://rbi.org.in/scripts/PublicationReportDetails.aspx?FromDate=11/16/2007&SECID=22&SUBSECID=0

India May Lift Ban on Some Agricultural Futures
Commodity futures market regulator Forward Markets Commission said on November 12 that it would recommend lifting the ban on futures trading in four commodities, including wheat.
http://www.thehindubusinessline.com/2007/11/13/stories/2007111352800100.htm

India’s Sebi Liberalizes Collateral Rules
The Indian Express reported that the Securities and Exchange Board of India would begin allowing qualified foreign institutional investors to post futures margin in the form of triple A rated sovereign debt. Previously margin collateral had to be in the form of cash only.

4. OTHER ASIA NEWS

McKinsey Publishes Study on “Why ASEAN’s Stock Markets Must Work Together”
The exchanges of Southeast Asia need to develop consistent policies and regulations across the region or risk being eclipsed by more advanced exchanges in other parts of Asia, Europe, or the U.S., according to a study from McKinsey & Co. that was released in October. (Note from editor: Helping stimulate the movement toward greater consistency and adoption of best practices throughout the region is one of the key aims of FIA Asia.)
The study says that by pursuing strictly local strategies independent of the rest of the region, ASEAN exchanges will end up being “cherry picked” by more powerful exchanges. That is, their best products could be taken by global competitors that can offer greater liquidity, efficiency, and operational and financial integrity.
The study goes on to say that while outright mergers among ASEAN exchanges are unlikely in the near-term, they can stave off the threat from global exchanges and enhance their prospects by adopting greater harmonization among themselves. However, whether the exchanges take the necessary course or not is probably more in the hands of policymakers and regulators than the exchanges themselves.
http://www.mckinseyquarterly.com/Financial_Services/Why_ASEANs_stock_markets_must_work_together_2070 (free subscription needed)

Tocom Adjusts Market Rules for Extended Trading Hours
The Tokyo Commodity Exchange has received regulatory approval to modify its market rules and brokerage rules in line with the planned move to longer trading hours early next year, the exchange said in a Nov. 23 notice to members. The changes include adjustments to the ending times for order entry, trading reports and declarations of options exercises. The move to longer hours, which will take effect on Jan. 8, was announced in September and is part of a broader effort to make the exchange more internationally competitive.
http://www.tocom.or.jp/news/2007/20071023_Modification_of_Rules_and_Regulations_Following_Extension_of_Trading_Hours.html

Tokyo Stock Exchange Regulation Begins Operations
Tokyo Stock Exchange announced on Nov. 1 that its newly formed self-regulatory unit, Tokyo Stock Exchange Regulation, has begun operating. The unit, which is headed by Masakazu Hayashi, a former vice finance minister, was created to ensure that market surveillance and other regulatory compliance functions are conducted with more independence, the exchange said. TSE also announced that it will implement several changes to its compliance division to strengthen self-regulation. These changes are intended, among other things, to promote market integrity and investor confidence, strengthen the early detection and prevention of problems, and provide a framework for absorbing self-regulatory operations of other exchanges.
http://www.tse.or.jp/english/sr/corporate/greeting.html
http://www.tse.or.jp/english/news/200710/071017_a.html
http://www.tse.or.jp/english/news/200710/071017_b.html

Goldman Sachs Becomes Options Market-Maker on Japan’s TSE
The Tokyo Stock Exchange has designated Goldman Sachs as an “equity options supporter”, meaning that the firm will make markets for options listed on the exchange and promote the products to investors. Goldman Sachs is only the third firm to join the program, which started in April 2006. The other two are Nikko Citigroup and Tokai Tokyo Securities.

Singapore Proposes Amendments to Securities and Futures Act
The Monetary Authority of Singapore has released a policy consultation paper on proposed amendments to the Securities and Futures Act and the Financial Advisers Act. The paper proposes amendments in such areas as regulatory assistance to foreign regulators and the definitions of “securities” and “futures contract” in the two acts. The MAS also released draft bills containing amendments to the SFA and FAA that implement proposals in earlier consultation papers. The bills are targeted for first reading in Parliament in the first quarter of 2008, the MAS said.
http://www.mas.gov.sg/news_room/press_releases/2007/MAS_Invites_Comments_on_Proposed_Changes_to_SFAFAA_Amendment_Bill_2007.html

SGX Buys 20% Stake in Philippine Marketplace
Singapore Exchange has agreed in principle to buy a 20% equity stake in Philippine Dealing System Holdings for an estimated investment of Php 150 million (approximately S$5m), SGX announced on Nov. 19. PDS operates an electronic platform for trading, clearing and settlement of fixed income securities and related derivatives. “This proposed acquisition will provide SGX the opportunity to expand into a new geographical market and collaborate with PDS on derivatives products.” SGX said. The proposed acquisition is subject to mutually agreeable terms and necessary approvals.
http://info.sgx.com/webnewscentre.nsf/b9c790d0d5ba5d2548256dcf0049ce28/48256838002f07b14825739700830459?OpenDocument

CME Group Sells Stake in Jade to SGX
Singapore Exchange has agreed with CME Group to buy out its stake in the Joint Asian Derivatives Exchange and discontinue the joint venture, SGX announced on Nov. 9. The joint venture was established with the Chicago Board of Trade last year to target commodity futures trading in Asia and currently offers futures on palm oil and rubber. SGX said it will continue to offer these products and remains committed to the development of the commodity market in Asia.
http://info.sgx.com/webnewscentre.nsf/b9c790d0d5ba5d2548256dcf0049ce28/48256838002f07b14825738e003b2b67?OpenDocument

MF Global Buys Australian Brokerage from TransMarket Group
MF Global has agreed to acquire BrokerOne, a Sydney-based futures and options broker with approximately 4,500 retail and professional trader customers in Australia. MF Global said the deal would position the firm as having the largest market share of trading on the Sydney Futures Exchange, and noted that approximately 10% of the firm’s net revenues came from the Asia-Pacific region.
“We continue to view all of Asia Pacific as a tremendous opportunity as regional growth in futures and options volumes and contracts has increased at a 25 percent compounded annual growth rate over the last five years,” Kevin Davis, MF Global’s president and chief executive officer, said in a statement. “MF Global plans to continue to make opportunistic acquisitions in the region that enable us to expand our customer base, liquidity and the products we provide.”
Prior to the acquisition, the controlling shareholder of BrokerOne was the Australian subsidiary of TransMarket Group, the Chicago-based trading group. TransMarket said it intends to focus its entire effort on its proprietary trading business and will remain a customer of BrokerOne following the change of ownership.
http://www.mfglobalinvestorrelations.com/phoenix.zhtml?c=194911&p=irol-newsArticle&ID=1056636&highlight=

CCorp to Provide Clearing Services to Australia’s FEX
The Clearing Corporation has signed an agreement to provide clearing and settlement services for derivatives traded on the Financial and Energy Exchange in Australia. FEX is scheduled to launch its derivatives market in 2008 and will offer derivative instruments on a variety of energy, environmental and financial products. FEX currently operates a specialized equities market for “clean technology and sustainable businesses.”
http://www.clearingcorp.com/press/pressreleases/20071113FEX.html

Traders Sue ASX for Busted Trades
Several trading firms, including TransMarket, Firehorse, and Kestrel Trading, have filed a lawsuit against the Australian Securities Exchange in reaction to a controversial cancellation in July of futures trades on the Sydney Futures Exchange, a subsidiary of the ASX. The firms are seeking damages of nearly $986,000 Australian dollars (US$885,121), arguing that the exchange over-reacted to an error trade. ASX said an internal investigation concluded that the SFE’s error trade policy was applied correctly.
http://www.asx.com.au/about/pdf/mr20071008_statement_of_claim_trade_cancellation.pdf

RCG to Offer Futures Brokerage in Dubai
Rosenthal Collins Group, one of the largest independent futures brokers in the U.S., has begun an initiative with Richcomm Global Services DMCC to offer comprehensive futures brokerage and clearing in all commodities in Dubai, the firm announced on Sept. 18. RCG said that it plans to begin offering access to the two Dubai exchanges through its Onyx trading platform, and intends to extend the partnership to cover India and South Africa. Richcomm is a broker member of the Dubai Gold & Commodities Exchange and a clearing member of the Dubai Mercantile Exchange.
http://www.rcgdirect.com/Common/Docs/RCG_Dubai_Initiative_091807.pdf

5. FIA ASIA NEWS

Japan to Host 2008 FIA Asia Derivatives Conference
The FIA is pleased to announce that the fourth FIA Asia Derivatives Conference will be held in Tokyo, Japan. The conference will be hosted by FIA Japan and the Japanese futures exchanges. The selection of Tokyo recognizes the importance of the Japanese markets as well as the regulatory and exchange developments taking place. The selection was announced during the third FIA Asia Derivatives Conference held in Taipei, Taiwan. That conference attracted more than 350 attendees and highlighted the rapid growth of derivatives exchanges across the Asia-Pacific region. FIA Asia thanks the Taiwan Futures Exchange for its generous support of this year’s conference.

FIA Joins “Engage China” Coalition
The Futures Industry Association has joined a coalition of financial services trade associations called Engage China that is working to increase market access in China for U.S. financial services firms. The coalition, which was formed in the fall of 2006, supports the goals of the U.S.-China Strategic Economic Dialogue, an official process of bilateral meetings that provides a framework for the examination of long-term strategic issues as well as the coordination of ongoing policy discussions. The eight other members of the coalition are: American Bankers Association, American Council of Life Insurers, American Insurance Association, Council of Insurance Agents and Brokers, Investment Company Institute, Financial Services Forum, Financial Services Roundtable, and Securities Industry and Financial Markets Association. The coalition visited Beijing Nov. 26-30 to meet with financial market regulators to discuss opening and modernizing China's capital markets.
“We are delighted to join the Engage China coalition and look forward to participating in the coalition’s campaign to further integrate China’s financial system into the world economy,” said FIA President John Damgard. “China’s commodity futures exchanges in Dalian, Shanghai and Zhengzhou rank among the world’s most active futures markets. The FIA’s member firms view China as a tremendously important potential market and they are actively working to apply their expertise in trading technology and risk management to the needs of Chinese customers. By the same token, our member firms are ready and willing to facilitate access for Chinese institutions to futures markets in London, Chicago, New York and elsewhere. In our view, more open access is a win-win for both sides.”
www.engagechina.com

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