Global Market Structure Asia Pacific Newsletter Contact: Deutsche Bank Equities Issue 18, 2012 Welcome to the APAC Market Structure Newsletter containing the news relating to market microstructure,exchange updates and regulatory developments. Email: [email protected]Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Hong Kong ................................................ Page 2 Short Position reporting regime commences HKSE, SSE and SZSE announce JV to develop index linked & equity derivative products China .......................................................... Page 4 CSRC publishes draft for revised QFII rules H-shares ETFs approved to be listed in SSE and SZSE Taiwan ........................................................ Page 7 Advanced measurement approach for calculating regulatory capital adequacy ratio introduced for securities firms Brokers urged to enhance short sale controls by TWSE India ........................................................... Page 9 Government softens GAAR proposals; market sentiment improves Securities Transaction Tax cut by 20% for NSE trades Japan.......................................................... Page 12 New head of Japanese FSA set to tackle insider trading TSE - OSE merger approved, offer launched and open until 22nd August Korea .......................................................... Page 14 Korea short selling position disclosure to be introduced 30th August KRX and Belarus finance ministry signed MoU Australia ..................................................... Page 16 ASIC response to market structure proposals post industry review of CP168 ASX improvements to Centre Point ASEAN ....................................................... Page 19 Singapore and Thailand establish a reciprocal cross border collateral arrangement SGX introduces dual currency trading for ETFs Quant Fact Sheet ....................................... Page 22
Transcript
Global Market StructureAsia Pacific Newsletter
Contact:
Deutsche BankEquities
Issue 18, 2012Welcome to the APAC Market Structure Newsletter containing the news relating to market microstructure,exchange updates and regulatory developments.
Hong Kong ................................................Page 2Short Position reporting regime commencesHKSE, SSE and SZSE announce JV to develop index linked & equity derivative products
China ..........................................................Page 4CSRC publishes draft for revised QFII rules H-shares ETFs approved to be listed in SSE and SZSE
Taiwan ........................................................Page 7Advanced measurement approach for calculating regulatory capital adequacy ratio introduced for securities firms Brokers urged to enhance short sale controls by TWSE
India ...........................................................Page 9Government softens GAAR proposals; market sentiment improvesSecurities Transaction Tax cut by 20% for NSE trades
Japan..........................................................Page 12New head of Japanese FSA set to tackle insider trading TSE - OSE merger approved, offer launched and open until 22nd August
Korea ..........................................................Page 14Korea short selling position disclosure to be introduced 30th August KRX and Belarus finance ministry signed MoU
Australia .....................................................Page 16ASIC response to market structure proposals post industry review of CP168ASX improvements to Centre Point
ASEAN .......................................................Page 19Singapore and Thailand establish a reciprocal cross border collateral arrangementSGX introduces dual currency trading for ETFs
Global Market Structure Hong Kong Newsletter Issue 18
Short position reporting
New rules regarding the reporting of short positions became effective on 18th June with the first reports being submitted to the SFC by the 26th June. Reminders were sent to the market around the process for making amends to the reports once they have been submitted (a new Reportable Short Position Form should be filed stating in the ‘Submission Remarks’ the reason for re-submission and the previous submission reference number), to take care of the accuracy of the stock codes used and to ensure that the correct closing prices are used for calculation that is the prices published by the HKEx rather than the last traded price as supplied by some vendors.
Additionally, the SFC will prioritise responses to questions that relate to operational or technical queries as there is now a wide range of materials available on the Rules. The SFC updated both the FAQs and the User Guide which can be accessed via this link: http://www.sfc.hk/sfc/html/EN/research/short-position-reporting/index.html
Venue News
LME selects HKEx for takeover bid, shareholders votes on 25th July
The Hong Kong exchange announced on 15th June that it entered into a framework agreement regarding the acquisition of the London Metal Exchange (‘LME’). It is offering to pay HK$16.7bn for the complete ordinary share capital of the LME, financed using existing cash resources and new debt facilities. One of the twelve LME board members voted against the move but the board overall felt that it would be in the best interests of the shareholders as a whole to allow the bid to proceed.
According to Reuters, some of the smaller shareholders have voiced opposition and top shareholder, JP Morgan, seems to have taken a reluctant view. The vote will take place on 25th July. The LME will continue to be regulated by the UK FSA and the management would remain unchanged. The HKEx aims to add commodities trading to its offerings while the LME was reported to have selected the bid of the HKEx mainly to expand its access and market share in China. Charles Li, CEO of the HKEx, has stated that there will be no change to the open outcry structure or the branding until at least 2015.
The merger has prompted the Hong Kong Mercantile Exchange to demand an end to government protection for the HKEx and allow increased competition.
Joint venture of Hong Kong, Shanghai and Shenzhen stock exchanges
The three exchanges signed an agreement on the 28th of June to create a joint venture to develop index-linked and equity derivative products. Among the first products will be cross-border indices including a benchmark index listing large Mainland enterprises listed in Hong Kong. The first Mainland approved ETFs are to be listed in Shenzhen and Shanghai and will track Hong Kong indices. Also pending approval are RQFII (“Renminbi Qualified Foreign Institutional Investor”) ETF trading on the HKEx allowing investment in A-shares using Renminbi raised outside mainland China (further information is in the China section of this newsletter).
Three directors from each exchange will be members of the board with the Chief Executive nominated by the Hong Kong Exchange. The government of Hong Kong officially welcomed the creation of the joint venture.
“The establishment of the JV will help increase foreign investors’ exposure to the Mainland market via Hong Kong. In addition, the JV can help raise the Mainland capital market’s influence in offshore markets and provide opportunities to explore opening up measures,” said SZSE President and CEO Song Liping.
More information can be found at http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/120628news.htm
Fig 1: Equities Hong Kong market monthly ADT (lit, auction & non-displayed order types)
Fig 2: Futures HKFE HSI monthly ADT
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Hong Kong Market Structure Monthly Newsletter 3
Quarterly results
Average daily turnover value in the first three months of 2012 declined by 17% to HK$63.2bn compared to the same period one year ago. Revenue declined 2% to HK$1.9bn and basic earnings per share declined 7% to HKD1.07.
The HKEx have released a summary of the market share between difference participants. The categories are defined as follows:
— Category A: Position 1 – 14
— Category B: Position 15 - 65
— Category C: Over 65
Platform upgrade
The Hong Kong exchange extended its support contract with NASDAQ OMX for a further five years and will upgrade its derivatives trading (HKATS) and clearing (DCASS) systems to NASDAQ OMX’s Genium INET platform. This system offers integrated trading and clearing facilities for a range of different derivatives.
On 18th June 2012, CSRC published on their website the draft of revised QFII rules for public consultation. The main changes compared with the current QFII rules are below.
— Requirements for applications are lowered as follows:
— Investment scope for QFII increased, under the proposed new rules, QFIIs can invest in interbank bonds and equity futures.
— Currently each QFII can theoretically have three brokers in each market however it’s realistically difficult to achieve as there is a “1-to-1” mapping requirement between the special RMB account and broker under the current rule. In the new draft rules, the “1-to-1” mapping requirement will be removed and allow each QFII to appoint up to three brokers in each market, opening the benefit of broker competition to the investors.
— Limits for QFII relaxed, the holding limit for all QFIIs in each individual stock has been raised to 30% from 20%, can exceed this limit given special approval related to strategic holdings.
— Application process eased by adding online documentation features, for application process details please contact us and happy to direct to our custodian department for further information.
— QFII can open special accounts for their clients.
Currently, hedge funds are not included in the language of the regulation meaning they are neither explicitly able to or prevented from applying for a license.
The market is viewing the changes as a move from the CSRC policy makers to improve the structure of investor bases by raising the market
Chinese Market Structure Update
Total (USD$) %loss/gain
Monthly ADT (June 2012) USD$18.65bn 25.01%
Source: Thomson Reuters, 2012
Source: Thomson Reuters, 2012
Source: Bloomberg, 2012
Source: Bloomberg, 2012
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Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types)
Fig 2: Equities Daily Turnover per venue - June 2012
Fig 3: Futures HKFE HHI monthly ADT
Fig 4: Futures Daily Turnover per venue - June 2012
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Deutsche BankEquities
Global Market Structure Chinese Newsletter Issue 18
Investor Current Rules Drafted New Rules
Securities Companies
Years of Business Experience > 30 years
AUM >= USD 10 billion
Paid-in Capital >= USD 1 billion
Years of Business Experience > 10 years
AUM >= USD 5 billion
Paid-in Capital >= USD 500 million
Fund Managers
Years of Business Experience > 5 years
AUM >= USD 5 billion
Years of Business Experience > 2 years
AUM >= USD 500 million
Insurance Companies
Years of Business Experience > 5 years
AUM >= USD 5 billion
Years of Business Experience > 2 years
AUM >= USD 500 million
Commercial Banks
Globally top 100 in terms of total Assets
AUM >= USD 10 billion
Years of Business Experience > 10 years
AUM >= USD 5 billion
Tier-1 asset >= 1billion
Other Institutional Investors
Years of Business Experience > 5 years
AUM >= USD 5 billion
Years of Business Experience > 2 years
AUM >= USD 500 million
5Chinese Market Structure Monthly Newsletter
shares of professional institutional investors from the current level. According to a Deutsche Bank research report ‘Equity capital inflows to rise on fast QFII expansion’, this is currently around 15.6%, compared to 70% in most developed markets. The dominance of retail investors in A-shares is considered one of the reasons for excessive market volatility.
Our research analysts view the expansion of QFII as positive for A-shares and likely to reduce the price gap between A/H dually-listed stocks. Meanwhile the ETF 2823.HK, the ISHARES FTSE A50 China Index, is trading at a 2.6% NAV premium. We believe that these price gaps will narrow or even disappear over time as Chinese financial markets gradually open up. Please let us know if you would like to speak to our research analysts on the impacts of new QFII rules.
2012 A-shares IPO forecasted to reach RMB 220 billion
According to Ernst & Young’s estimation in a report titled “Global IPO Trends”, this year’s A-share IPO volume may reach RMB 220 billion, reversing the poor performance of the first half of 2012. Year to date there are 104 IPOs (63 deals fewer than the year earlier) which raised RMB 73 billion (RMB 100 billion less year-on-year).
The report states that the average IPO price is lower than last year, part of the reason is said to be the stricter regulation implemented by CSRC, which contains measures to limit price-to-earning ratio and issuing prices. According to Ernst & Young’s report, the Shenzhen Stock Exchange registered more IPOs than any other stock exchanges in the world in the first six months of this year. Nasdaq OMX Group, buoyed by Facebook’s $16 billion IPO, raised the most capital.
SAFE to relax the Foreign Direct Investment rules
Shanghai Securities Journal reported that SAFE is planning to simplify the Foreign Direct Investment (“FDI”) foreign exchange rules, as a further step for RMB to become a global currency. Under the proposed changes, opening or adding to foreign exchange accounts and transfers between different FX accounts for FDI will no longer be subject to regulatory examinations.
The change follows our report in April newsletter that regulators are pledged to loose controls over the foreign direct investment that have a “genuine” background.
China banks took 29 percent of 2011 global banking profit
According to the 2011 report published by the British magazine “The Banker”, China banks took 29.3% of global banking profit, up from 4% in 2007. ICBC, CCB and BOC took the top 3 posts while four out of the top 10 banks are from China.
China cut interest rates and widened the floating range of rates
PBOC announced that effective 8th June 2012, the one-year benchmark interest rate will be cut 25bps to 3.25% from 3.5%.
It also widens the floating range of both deposit and loan actual rates which have been viewed as a significant regulatory relaxation of interest rate control.
7 new QFIIs licenses approved by CSRC in May
On CSRC’s website it released the following 7 entities get approved for QFII licenses:
1. Eurizon Capital S.A.
2. BOCI-Prudential Asset Management Ltd.
3. Fullerton Fund Management Ltd.
4. Lion Global Investors Ltd.
5. GENERAIL Fund Management S.A.
6. William Blair & Company, L.L.C.
7. Investec Asset Management Limited
US$1.35 billion quota approved by SAFE for 10 QFIIs
SAFE released the following 10 entities get approved for a combined US$1.35 billion quota.
1. BlackRock Institutional Trust Company (US$100 million)
2. Northern Trust Global Investments Limited (US$100 million)
3. Mercuries Life Insurance Co,Ltd (US$50 million)
4. American International Assurance Company Limited (US$150 million)
5. Capital Research and Management Company (US$100 million)
6. City of London Investment Management Company Limited (US$100 million)
9. Abu Dhabi Investment Authority (Additional US$300 million)
10. First State Investment Management (UK) Limited (Additional US$100 million)
China-India bilateral trade to reach US$100 billion by 2015
During the Rio+20 summit in Rio De Janeiro, Brazil, Chinese Prime Minister Wen Jiabao met with Indian Prime Minister Manmohan Singh and mutual agreed to take the China-India relationship to the next stage. They aim to push the bilateral trade between the two countries to US$100 billion by 2015, from the current US$74 billion in 2011.
Regulation for Securities Investment Funds to be changed
CSRC recently announced that they may allow fund management companies to file for multiple sub-funds in one application and lower the minimum capital raising threshold to RMB50 million from RMB200 million.
This change will loosen the current application criteria and is being viewed by the market as a further step towards introducing sponsored fund products in the future.
Chinese corporate to invest USD500bio overseas by 2015
The Ministry of Commerce’s estimation shows the overseas investment by Chinese companies will reach US$500 billion by 2015, up more than 50% from the current US$320 billion.
SAFE data shows in Q1 2012, the foreign capital inflow was US$660 million while capital outflow made by Chinese companies was US$40 million.
Rates Before Adjustment After Adjustment
Deposit Rate 1-100% of Standard Deposit Interest
1-110% of Standard Deposit Interest Rate
Loan Rate 90%-100% of Standard Loan Interest Rate
80%-100% of Standard Loan Interest Rate (Housing loan can be lowered to 70%)
6Chinese Market Structure Monthly Newsletter
China Yuan to start direct trading with Japan Yen
Following our report in May’s newsletter, China Foreign Exchange Trade System (“CFETS”) announced the direct trading of RMB/JPY will be launched in June, to improve the ties between China and Japan also as a further step towards RMB internationalization. Currently China only allows direct trading of RMB/USD.
China’s wealth management industry has bright future
Mr. Guo Shuqing, the chairman of CSRC, stated in a recent speech that the China’s wealth management industry has bright future.
“The wealth management industry in China is very promising … If China can shunt half of the more than 80 trillion yuan ($6.3 trillion) in bank deposits into the wealth management industry, the scale will be significantly considerable.”
As of full year 2011, the asset under management for China’s fund industry was RMB2.19 trillion, while the value of banks’ wealth management products is RMB 4.57 trillion. Trust type assets and Insurance assets are RMB 4.8 trillion and RMB 6 trillion respectively.
Mr. Guo also said CSRC would continue to support the development of the industry while ensuring sufficient governance.
Venue News
SSE, SZSE and HKEx set to form Joint Venture
On 28th June2012, the Shanghai Stock Exchange, Shenzhen Stock Exchange and Hong Kong Exchanges & Clearing Ltd agreed to form a joint venture to boost cross-broader activities. The venture will have paid-in capital of HK$300 million (HK$100 million from each party) and be based in Hong Kong. It will develop index-linked and equity derivatives. Currently around 70% of total trading volume on the Hong Kong Exchange comprises Chinese related companies.
“As China continues to open up and the (yuan) gradually internationalizes, it is inevitable we will have to compete in the international capital market. Our efforts in further cooperation with HKEx and develop products for the offshore market will bring about a win-win situation for both Hong Kong and the mainland,” said Zhang Yujun, president of the Shanghai exchange.
H-shares ETFs approved to be listed in SSE and SZSE
Further to our May report on the first two cross-border ETFs listed in Shanghai and Shenzhen Stock Exchanges, the Hong Kong’s Securities and Futures Commission (“SFC”) made the announcement on 29th June that “the SFC welcomes the China Securities Regulatory Commission’s approval today of two ETFs to be listed on the Shanghai and Shenzhen stock exchanges that will invest directly in Hong Kong listed stocks, each tracking a HK stock index”. The two ETFs are China AMC’s HSI ETF listed on SZSE and E Fund’s HSCEI ETF on SSE. In addition to RMB purchases, the two ETFs can also be purchased / redeemed by foreign currencies.
The SFC has also approved the so-called “RQFII ETF” to be listed in Hong Kong which will track China A-shares index. The first RQFII ETF is said to be launched on 9th July, targeting CSI300 index managed by China Asset Management.
SSE to launch single stock options
Fox business reported that Shanghai Stock Exchange is on track on the single stock options launching plan. “Simulation for trading options will likely to be launched soon” said a person familiar with the situation. ICBC and SSE 50 ETF have been chose as the first two stocks to be tested on.
Taiwan to stay as Emerging Market in MSCI Annual Market Classification Review
It has been announced that Taiwan will remain with its “emerging market” status, rather than being upgraded to “developed market” in MSCI Inc’s annual market classification review for 2012.
This is said to be partly because the liquidity of Taiwan’s stock market isn’t high enough in comparison to other developed markets, as well as the central bank’s tight grip on fund flows, the exchange rate of the New Taiwan dollar, and the current 7% ceiling for the daily rise or fall of a stock.
FSC changes requirements for foreign investments by insurers
To coordinate with a recent amendment of the Insurance Act, and to continue with its ongoing review of legislation governing foreign investments by insurers, the FSC updated sections of the “Regulations Governing Foreign Investments by Insurance Companies” as of 11th May 2012. Changes to be noted are as follows:
(1) life insurance enterprises engaged non-investment-linked life insurance business collected and paid in foreign currency are now allowed to apply to the competent authority for permission not to count investments made in connection with this type of business against the quota for their total foreign investments;
(2) The cap on foreign investments in instruments rated BBB+ has been raised from 40% of shareholders’ equity to 60% of shareholders’ equity; and
(3) Restrictions on the mainland investments of insurers have been eased, with the amended provisions now requiring that, at the time it invests in the mainland, the insurer must have had a ratio of regulatory capital to risk-based capital of at least 200% for the preceding fiscal period.
Requirement to use advanced measurement approach for calculating regulatory capital adequacy ratio
Starting in July 2012, integrated securities firms will be required to use the advanced measurement approach when calculating its regulatory capital adequacy ratio when reporting their June 2012 securities firm capital adequacy information. Article 59 of the “Regulations Governing Securities Firms,” states that firms are required to keep regulatory capital and operational risk equivalent at adequate levels. This can be achieved in two ways: either the advanced measurement approach, or the simplified measurement approach. These approaches measure the net amount of eligible regulatory capital used in determining the regulatory capital adequacy ratio, and measuring overall risk.
Also, as of 1st July, Point 2 of the FSC’s 23rd December 2008 Order No. Financial-Supervisory-Securities-II-09700676703 (stating that integrated securities firms are allowed to voluntarily apply to the Taiwan Stock Exchange Corporation for permission to use the advanced measurement approach) ceased to apply.
Fig 2: Cash Equities Daily Turnover per venue - June 2012
Fig 3: Futures FTX TAIEX monthly ADT
Fig 4: Futures Daily Turnover per venue - June 2012
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8Taiwan Market Structure Monthly Newsletter
FSC adopts International Financial Reporting Standards
The FSC issued an Order setting out provisions for compliance by public companies aiming to maintain a stable financial structure. On a public company’s first-time adoption of the International Financial Reporting Standards (“IFRS”), the company shall set aside an equal amount of special reserves, subject to specific regulations.
Also, from the fiscal year that a company first adopts the IFRSs, the company shall set aside special reserve as provided, and shall report at the shareholders meeting on the status of adjustment of distributable earnings and the amount of special reserve set aside, to inform the shareholders of any effects.
Following a company’s adoption of the IFRSs for the preparation of its financial reports, it shall set aside to special reserve an amount equal to “other net deductions from shareholders equity” for the current fiscal year.
Full details can be found in newsletter no: 96 (June 2012 edition) of the Securities and Futures Bureau via this link:
In December 2011 plans by the Bank of China and the Bank of Communications to set up branches in Taipei were approved by the FSC. Following the approval of business permit allocations, Bank of China (Taipei Brach) commenced operations on 27th June and the Bank of Communications is scheduled to open on 16th July.
84 listed firms required to use electronic voting at shareholders meetings this year
84 exchange and OTC-listed companies voted electronically at their shareholders’ meetings. Paragraph 1 of article 177-1 of the “Company Act” requires that these companies describe the method for exercising the voting power in the shareholders meeting notice given to shareholders.
By providing the option of electronic voting, a company makes voting easier and the methods of voting more diverse. Timing or location no longer limits the ability of shareholders, things that would have to be considered in a shareholders meeting. A shareholder who wishes to vote electronically needs to be aware that, in accordance with Article 177-2 of the “Company Act,” electronic voting must be exercised two days prior to the scheduled meeting date of the shareholders’ meeting.
Venue news
TWSE proposed initiative requesting brokers to enhance the short sale control
The Taiwan Stock Exchange has released the following initiatives regarding specific approaches to enhance the short sale control:
1) Revoke the current practice that brokers may execute the short sale orders based upon the stock loan information provided by clients, i.e. the lender’s names, contact information, stock names, quantities, etc.
2) T+1 transfer of borrowed shares is still available but it must follow below rules, i.e. you may only short sell the borrowed shares through the brokers that post the negotiated SBL to TWSE on your behalf or through the brokers that you borrow the shares from. This implies that you may only short sell after the stock loans are confirmed and will be transferred on the next business day.
The TWSE explanatory conference planned for 10th July will be an opportunity for teams to get clarification on any questions they had relating to the procedures to this effect.
The TWSE will issue a new letter to replace the old one, dated 17th January 2009, with reference no. 0980200259. This will add a requirement that the borrowed shares to be short sold based upon the stock loan information must be transferred to the borrower’s TDCC/custodian on the same day.
Memorandums of Understanding
Taiwan GreTai Securities Market (GTSM) and Deutsche Börse signed a MOU on 25th June, reflecting an agreement by both parties to exchange information in order to facilitate the further development of both financial markets.
GTSM also signed a MOU with NASDAQ OMX. Both signings happened at the 2012 Technology of the Future Conference, in Stockholm. Chen sees these steps as a major breakthrough for GTSM since becoming a member of the World Federation of Exchanges in October 2011. He hopes that GTSM will become more internationalized, and sees MOUs and new partnerships with foreign stock exchange companies to help with this process.
NASDAQ OMX Chief Executive Officer, Bob Greifeld, said that there was potential for the cross-Taiwan Strait market and the signing of the MOU would help the international visibility of Taiwan’s market.
Government dilutes GAAR proposals; market sentiment shows improvement
The Indian government released the new draft guidelines for the General Anti-Avoidance Rules (“GAAR”), whereby most of the contentious issues have been addressed in the favor of investors. The major relaxations include proposals of a monetary limit for invoking GAAR, use of the tax-avoidance rules only in cases where FIIs choose to take the benefit of double tax avoidance treaties and putting the onus of proving wrong-doing on the authorities.
P-Note investors in particular have been reported to have pulled out a total of Rs 1 lakh crore (US$ 20bn) from the Indian markets since April 2012. A similar trend is witnessed for FII investors who pulled out a net of Rs 1,957 crore in the second quarter this year. A number of foreign investors have shifted to the Nifty futures offered on the Singapore exchange to gain exposure to the Indian markets while avoiding tax issues. The flight of investors to the SGX Nifty futures segment even led the Indian institutional brokers to consider applying to Monetary Authority of Singapore (“MAS”) for trading license in the SGX’s futures segment.
The markets, that had been trending downward for the last 3 months since the GAAR proposals were announced, rose sharply on the announcement of the rules to register the year’s largest single-day gain.
SEBI provides more clarity on QFI regime; relaxes entry criteria
SEBI changed the definition of a Qualified Foreign Investor (“QFI”) to include the residents of six gulf countries (UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait) and all 27 member countries of the European Commission (EC) in addition to all countries compliant to FATF standards. Non-resident Indians (“NRIs”) will also be allowed to participate through this channel if they close all their existing accounts first.
The following key points apply to QFIs:
— QFIs will not be allowed to invest into Indian securities through any other direct/indirect route except Foreign Direct Investment (“FDI”)
— QFIs cannot issue P-notes or Offshore Derivative Instruments to other investors.
— Details of the ultimate beneficiary owner should be always available and accessible.
— Although a person/entity can make investments through both FDI and QFI routes, their aggregate holding in a company should not exceed 5% of the total paid up capital of that company at any time.
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Fig 2: Equities Daily Turnover per venue - June 2012
Fig 3: Futures NSE Nifty monthly ADT
Fig 4: Futures Daily Turnover per venue - June 2012
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10Indian Market Structure Monthly Newsletter
— QFIs will be treated on par with non-institutional bidders (HNI category) for public issues.
— Guidelines have been issued on operational aspects of the QFI accounts for intermediaries.
Officials from SEBI, Government of India and the two stock exchanges NSE and BSE are also holding road shows in the gulf countries to spread awareness of the QFI route for investing into Indian markets. It is learned that response received is good and a number of Gulf HNIs have shown interest in registering as a QFI.
SEBI notifies revised timelines for P-notes and ODI reporting
The Securities and Exchange Board of India has announced changes to the timelines for reporting of all P-notes and ODI related transaction. SEBI has substantially cut the time-lag in the reporting of these transactions, all FIIs will now have to report all their P-note transactions for the month within 10 days. The major changes include
— The window for reporting of all P-note transactions has been shortened from six months to 10 days.
— The first report for the month of Oct-2012 must be submitted to SEBI at the latest by 10th November, and should include data for such transactions done between May 2012 and Oct 2012.
— Transaction reports from December 2011 to April 2012 can still be submitted with a six month lag
SEBI announces new shareholding, ownership and listing norms for Stock Exchanges
SEBI has notified the new shareholding, ownership and listing norms for Stock Exchanges and other Market Infrastructure Institutions including Clearing Corporations. The earlier regulations for Manner of Increasing and Maintaining Public Shareholding (MIMPS) in Recognised Stock Exchanges now stand repealed. Below are the highlights of the new norms:
— All recognised stock exchanges must have a minimum net worth of Rs 100 crore at all times.
— At least 51% stake should be held by public.
— No entity (Indian or foreign; either individual or persons acting in concert) will be allowed to hold more than 5% stake in a stock exchange directly or indirectly. Although stock exchanges, depositories, banks, insurance companies and public financial institutions from India can hold upto 15% stake as an exception to the rule.
— The collective stake of all foreign investor entities cannot exceed 49% of which investments through the FDI route are capped at 26% while those through FIIs will have an upper limit of 23%.
— All FIIs will need to acquire shares of listed stock exchanges through the secondary market. For unlisted SEs the shares can be acquired by FIIs through transactions other than initial allotment of shares outside a recognised SE.
— The shareholders currently holding a stake in excess of the notified limits will have to reduce the position within a period to be decided by SEBI (which could be up to 3 years).
— A recognised stock exchange can apply for listing on any exchange other than itself and its associated stock exchange if it is in compliance with the new regulations and has SEBI’s approval. The shares of a stock exchange and a clearing corporation will have to be in demat format and a clearing corporation cannot hold any right, stake or interest in an exchange.
Further, a Conflicts Resolution Committee (CRC) will be constituted by SEBI with a majority of external and independent members to consider matters of policy and guidelines involving conflict issues and recommend standards pertinent to the areas of potential conflict in exchanges.
The new norms are expected to encourage setting up of new stock exchanges and also listing of existing exchanges. Particularly MCX-SX can now re-apply to start its stock/derivatives segment as it will have upto 3 years to resolve its shareholding pattern issue due to which its earlier application was rejected by SEBI.
For the SEBI circular and detailed regulation notification please click –
SEBI relaxes stake sale norms through OFS / IPP routes
SEBI has amended the rules for promoters planning to offload their stake through Offer for Sale (OFS) or Institutional Placement Program (IPP) in order to comply with the minimum public shareholding regulations. Below are the major changes brought into effect: -
— The cool off period between two consecutive OFS/IPP offers has been reduced to 2 weeks from 12 weeks.
— The margin requirements for institutional investors have also been made flexible. Now the institutional investors can either pay 100% margin upfront, or a lower percentage agreed by the stock exchange. Although they will not be able to modify the bid in case they opt for lesser margin.
— Cancellation of bids will not be allowed during the last 60 minutes from the close of the bidding session
— Announcement of floor price in not mandatory anymore
— The minimum offer size for OFS and IPP is set at Rs 25 crore. However, issues of lower than Rs 25 crore will also be allowed to achieve minimum public shareholding in a single tranche
SEBI is reported to be in consultation with market participants to finalise the guidelines regarding the fungibility between Indian Depository Receipts and the corresponding shares listed on the foreign stock exchanges. The announcement to the same effect is expected soon.
SEBI executive director Usha Narayanan demits role
Ms Usha Narayanan, ED at SEBI and in charge of the corporate Finance department will be leaving her role as head of the Listing and Corporate Restructuring.
Another general manager at SEBI related to the investigations department, Ms Neelam Bhardwaj is reported to have opted for voluntary retirement.
Exchanges to monitor abnormal stock movements, issue “caution notices” to market entities
The stock exchanges NSE and BSE in conjunction with SEBI have decided to issue a “caution notice” to the identified responsible market participants (including brokers and their clients) in case they see any abnormal stock movements in the markets. The brokers / clients are required to take all necessary measures to stop the abnormal trading activity upon receiving such letter failing which the matter will be referred to SEBI for further action.
Following instructions from the government, National Stock Exchange has cut its Securities Transaction Tax (“STT”) on delivery based trades to 0.1% of the notional value. The new rate came into effect from 1st July 2012.
The Russian exchange MICEX-RTS launched the futures of key equity indices of BRICS nations – including the Indian Nifty - as a part of the BRICSmart alliance program. This provides the Russian investors with an opportunity to invest in asset classes of all BRICS nations.
In another development, the Dubai Gold and Commodities Exchange (DGCX) is planning to offer Sensex futures on its platform for local investors to gain exposure to Indian markets. The exchange is awaiting regulatory clearances to go ahead with its plans.
The NSE is unlikely to get a waiver from Forwards Market Commission (FMC) regarding its appeal to consider itself as a promoter exchange and allow it to increase its stake in National Commodity & Derivatives Exchange (NCDEX) to 15% from the current 10%. On the contrary it might need to offload 5% of its stake to comply with the maximum shareholding pattern norms.
Even though IPO levels has been subdued on the main boards of the exchanges, the SME platform of the BSE launched earlier this year continues to attract both issuers as well as market makers. 28 intermediaries have registered as market makers, 2 firms have already listed with 5 in the pipeline.
The BSE has decided to suspend trading in shares of 48 companies as they were not in compliance with BSE’s listing norms. The suspension will come into effect from 11th July 2012.
For the complete list of companies, please click the link -
Japanese regulators are set to ease restrictions on alternative trading platforms to encourage a more level playing field between the venues and make it easier for alternate trading venues to compete with a merged Tokyo Stock Exchange and Osaka Securities Exchange. At present, the rule for Proprietary Trading Systems (PTS) requires that if a trade is executed away from an exchange on a PTS against more than 10 counterparties, and that trade took an individual’s position over 5% of the outstanding shares, then it would be mandatory to launch a takeover bid.
The Japanese Financial Services Authority released an official paper for public comment on the proposed removal of the rule. Regulators will receive comments until 26th July, and if there are no objections, the change will be implemented in October.
PTS must also meet the following requirements:
— Be a continuous matching venue
— Display prices on a real time basis
— Venue must ensure fair and equal access
From the client feedback the current law was discouraging institutional buyers from trading on alternate platforms as they would not want to execute a trade that might tip them over this level where they have no intention of launching a takeover bid.
The owners of the PTSS in Japan applauded the move, but cautioned that regulators still need to do more to create a level playing field. For example, if a PTS reaches a 10% share of the overall market trading, or 20% of any one stock, it has to apply for formal exchange status. Also, retail investors trading on the margin are still banned from accessing PTS altogether.
The paper is posted on the website in Japanese, you can access via this link:
Nomura CEO, Watanabe, apologises for insider trading role
Kenichi Watanabe, CEO of Nomura Holdings Inc, made a public apology and the promise to make sincere efforts to restore confidence. Watanabe addressed shareholders at Nomura’s annual meeting held in Tokyo, having been under pressure to explain how this information was leaked, as well as deteriorating profit, falling shares and dividend cuts.
Nomura’s share price is at the lowest in 37 years and its dividend has been cut after falling earnings. The company is cutting costs that have significantly increased after purchasing the bankrupt Lehman Brothers Inc during the 2008 global financial crisis.
Financial services minister, Tadahiro Matsushita, said that Nomura may face “severe action” over this, and urges the company to “explain as much as they can in terms of corporate governance and employees’ ethics”.
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Fig 2: Equities Daily Turnover per venue - June 2012
Fig 3: Futures OSE NIKKE monthly ADT
Fig 4: Futures Daily Turnover per venue - June 2012
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Further fines for alleged insider trading
A former executive at SMBC Nikko Securities Inc (a brokerage unit of Sumitomo Mitsui) became the first banker from a major firm to be detained for suspected insider trading since 2008, when he was arrested recently. The FSA of Japan ordered Sumitomo Mitsui Trust to pay two fines totaling ¥130,000 for alleged insider trading. Sumitomo Mitsui Trust has said that it will comply with the FSA’s wishes.
Separately, the Japanese FSA has also ordered a fine of ¥130,000 against Asuka Asset Management Ltd for alleged insider trading linked to a share offering by Nippon Sheet Glass Co. in 2010. Asuka Asset Management Ltd has said they will work hard to strengthen internal controls.
The FSA is currently looking into ongoing investigations centering on at least four high profile cases where Japanese blue-chip companies saw their shares drop in heavy short-selling, shortly before announcing major capital-raising plans that significantly diluted outstanding shares including Sumitomo Mitsui Financial Group Inc.’s brokerage unit and JP Morgan Chase & Co. The investigations are being seen as an effort to restore confidence in Japan’s capital markets given recent concerns about the security of private information within financial institutions.
Japan FSA to order 12 brokerages to submit report by 3rd August
The Japanese FSA is currently asking 12 brokerages to inspect their internal controls and submit reports by 3rd August to determine the appropriateness of structural governance and controls on information.
The 12 brokerages are as followed: SMBC Nikko Securities, Goldman Sachs Securities, Citigroup Securities, JP Morgan Securities, Daiwa Securities, Deutsche Securities, Nomura Securities, Mizuho Securities, Mitsubishi UFJ Morgan Stanley Securities, Merrill Lynch Securities, Morgan Stanley MUFG Securities and UBS Securities.
Japanese shareholders taking a more activist role
Following a number of public issues concerning corporate governance, it has been reported that Japanese shareholders are starting to become more vocal on their views of how the companies that they have invested in should be run, and in the level of information that is disclosed. A demonstration was held at the recent annual meeting of Tepco, the electricity company operating the earthquake damaged Fukushima nuclear plants, where resolutions including opposition to board appointments and demands to decommission the remaining reactors, were mooted.
Other news stories such as Olympus, the bankruptcy of Japan Airlines and most recently the fining of Nomura have resulted in a renewed level of interest in the structure and practices of corporate boards. Historically, it would appear that companies have not made it easy for investors to vote. In 1995, companies comprising 96% of the companies traded on the TSE held their shareholder meetings on the same day. In 2012, that has fallen to around 42% with new companies in particular starting to hold meetings on weekends to encourage greater transparency.
Venue News
Approval given for Japanese exchange merger
The Japanese Fair Trade Commission released an official announcement granting approval of the TSE/OSE merger given a number of conditions being met. The venues can now proceed to the next step and launch the TOB process where TSE will buy OSE’s outstanding shares. This bid will need to be approved by the shareholders of both the TSE and OSE.
The JFTC stipulates three conditions to the merger, to protect competition:
1. Creation of an independent advisory committee for listing fees. By integrating OSE JASDAQ and TSE Mothers, there will be a
concentration of around 95% of listing in emerging markets under one company. To prevent anti-competitive activities, any changes to the fee table will be managed by a new, independent advisory committee.
2. JSCC has to keep providing clearing service to PTSs and not to bring disadvantage to them.
3. TSE will extend trading hours in TOPIX Futures to cover Asian business hours from 30th July. The TSE gave a license to list Topix Futures to NYSE Liffe.
On 6th July, the JFTC go ahead was followed by the Approval for Business Restructuring Plan being given by the Prime Minister. The business combination is scheduled to complete by 1st January 2013.
For full notices see here:
http://www.tse.or.jp/english/
TSE hold 5th Annual General Shareholders meeting
With the key topic of ‘TSE’s Efforts to Revitalise the Japanese Stock Market’, 101 shareholders attended the meeting on 19th June which approved the reappointment of the executive directors. The talk highlighted the following points:
— Japan’s TOPIX fell by 15% in the preceding week compared to New York falling 3% and London 4%. Germany and France saw falls of around 10% and Spain and Italy, as countries close to the Eurozone crisis, dropped by 16%. It was highlighted that the TOPIX was falling by similar levels to the Eurozone countries despite Japan expecting 2% growth with domestic companies expecting 22% rise in ordinary profits.
— Market participant structure was pointed to as part of the reason with a peak of 73% of investors being located overseas. It was suggested that these investors may not realise there are positive signs in the Japanese economy.
— Individual investors account for around 20% of trading and of those, 60% engage in margin trading which the TSE is interpreting as showing an increase in short term holdings. When combined with the 40% market share of the HFT players, it would mean that more than half the trading is short term. It was stressed that both overseas and HFT investors are seen as ‘indispensable’ to the market.
Tokyo Stock Exchange select Corvil to manage latency on the Arrowhead and Tdex+ Trading Systems
The TSE has selected CorvilNet (Corvil’s latency management system) to monitor its trading systems Arrowhead, Tdex+ and Arrownet, as the platform of choice to manage performance at the network, message and application layer, for both market data and transaction processing systems. The exchange stated latency management was the key factor in deciding on the provider to deliver transparency and performance to their customers.
Corvil’s solution meets the need for highly granular reporting of end-to-end transaction performance and market data feeds while also managing all aspects of network performances. CorvilNet also provides real-time analysis of market data distribution, allowing TSE to detect, capture, alarm and report on message sequence gaps.
Sources:www.tse.or.jp
www.yomiuri.co.uk
www.wsj.com
www.risk.net
www.marketwatch.com
www.ft.com
www.bloomberg.com
www.nytimes.com
Korea short selling position disclosure to be introduced from 30th August
A new reporting requirement on substantial short selling position will be introduced as the revisions on the Presidential Decree of the Financial Investment Services and Capital Market Act were passed by the Cabinet Council on 21st June. The new rules will be effective from 30th August and include the following features: — Reporting entity: Investor— Instruments covered: Listed equity shares— Reporting threshold: Short positions exceeding 0.01% of a listed
company’s total outstanding shares— Reporting details: Securities shorted, position holder’s name,
and % of total outstanding shares shorted— Reporting method: Financial Supervisory Services (“FSS”) website
(www.fss.or.kr)
For more information, please see http://www.fsc.go.kr/eng/wn/list_qu.jsp?menu=01&bbsid=BBS0048.
Bank of Korea invests US$300 million in China A-shares
The Bank of Korea announced that it has invested US$300 million into China A-shares under the Qualified Foreign Intuitional Investor (“QFII”) program to diversify its foreign reserve. The China Securities Regulatory Commission (“CSRC”) granted Bank of Korea the QFII license in December 2011.Source: People’s Daily Online (http://peopledaily.com.cn)
South Korea signed MoU on cross-border bank supervision with Indonesia
The Chairman of the Financial Services Commission (“FSC”) Seok-dong Kim and the Governor of the Financial Supervisory Service of Korea (“FSS”) Hyouk-Se Kwon signed a Memorandum of Understanding (“MoU”) on cross-border bank supervision with Darmin Nasution, the Governor of Bank Indonesia.
Signing of the MoU is aimed to increase cooperation between two regulatory bodies in areas including (i) exchanging information concerning the outcome of bank supervision; (ii) introducing cross-border bank inspections made possible by a cooperative inspection process; (iii) organising regular sessions in supervisory colleges; and (iv) exchanging information on the progress of bank supervision in general, including the establishment of banks operating across borders, according to Bank Indonesia.
Source: Office of the Governor, Bank Indonesia (www.bi.go.id),
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Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types)
Fig 2: Equities Daily Turnover per venue - June 2012
Fig 3: Futures KFE KOSPI monthly ADT
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15Korean Market Structure Monthly Newsletter
Venue Updates
KRX and Belarus finance ministry signed MoU
KRX and the Finance Ministry of Belarus signed a Memorandum of Understanding (MoU) on 12th June to cooperate in modernisation of Belarus’ capital markets including consulting service on securities market regulation, IT infrastructure and professional education.
Response given to market structure proposalsFollowing the CP168, ASIC have responded to the market.
Proposal Response Key dates
To introduce new rules on market manipulation and disorderly trading
No changes are to be made n/a
Introduce formal testing requirements
Will not make part of the rules but will release guidance
Guidance to be published in Q3
Introduction of a ‘kill switch’ and direct control over pre trade filters
Kill switch and filter requirements to be implemented although real time monitoring and post trade analysis will be left as guidance
Draft market integrity rules and guidance to be released early Q3
Minimum standards for direct electronic access
No rule implementation. ASX and Chi-X not to permit sponsored access. No introduction of legally binding agreements.
Draft guidance to be released early Q3
Short selling relief for market makers
No change to current position
Introduction of limit up-limit down (for cash and futures markets)
Proposed change will not go forward, rules on anomalous order thresholds (‘AOT ‘) including the extreme cancellation range will be amended to refer to an ‘extreme trade range’. This may trigger a 10 minute pause in line with that currently in place for price sensitive announcements.
Draft amended guidance has been released – see Regulatory Guide (‘RG’) 223 via this link: http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Attachment-2-to-CP179-draft-rg223.pdf/$file/Attachment-2-to-CP179-draft-rg223.pdf
New data fields for surveillance purposes
Will proceed with rule although with a smaller set of data changes.
RG 223 has been updated. Rule will apply to market operators 11 – 12 months from when rules are made. Market participants should consider upgrading systems prior to that date
Meaningful Price improvement
Will proceed with change from ‘at or within the spread’ to one tick size or mid-point.
RG 223 has been updated. Further consultation to be expected on tick sizes
Minimum sizes for dark trades
Proposed change will not go forward at this stage
RG 223 has been updated.
Block trades Will proceed with change and implement the 3 tiers of AU$1 million (BHP, CBA, RIO, WBC, ANZ, NAB, TLS, NCM, WPL, FMG, WES, WOW, QBE, WDC, CSL, ILU, LYC, MQG, STO, ORG, AMP, NWS) , AU$500,000 (BXB, IPL, SUN, SGP, ORI, AMC, TCL, CCL, WRT, QRN, OSH, WOR, AWC, MCC, LEI, IAG, AGO, GPT, COH, AIO, ASX, AGK, OZL) and AU$200,000 (all other products.
Further work will be conducted into the area of high frequency trading (‘HFT’) and dark pools, particularly
— Continuing analysis on the prevalence and impact of HFT and darks pools
— Review the nature of trading, monitoring, handling of conflicts of interest and misconduct
— Review the impact on market orderliness
— Consider the existing regulatory framework, particularly whether ‘market operator-like’ obligations should be applied to broker crossing systems (e.g. transparency of access and processes, management of conflicts of interest and appropriate supervision)
— Identify any existing conduct that may warrant a regulatory response
Results on this will be released in Q4 2012.
ASIC Annual report on ASX Group
This year’s annual report considers the sufficiency of technological resources given the outages in October 2011 and the failure to reach internal benchmarks. Four areas need to be changed at the exchange:
Technology enhancements
1. The trading system operator, NASDAQ OMX, must have on shore (rather than overseas) support.
2. Testing plans must be shared with the various business units. A new role may be created that would be responsible for reviewing end to end test plans and act as quality assurance across the ASX Group.
3. A review of the system code to look for areas where legacy code may not have be updated. For future changes, legacy code must also be tested.
4. Given the outage took place on an options expiry day, ASX Group is reviewing the emergency process for ‘catastrophic’ events (including where exchange traded option positions cannot be closed).
5. For one weekend every quarter, from Q3 2012, a test must be completed in the backup environment with a ‘normal trading’ environment. Participant involvement will be mandatory.
Conflict management
1. A new section will be added to the ASX website stating how conflicts are managed. This will include the names of the review parties, framework and processes.
2. ASX Regulatory Assurance will review the procedures with regard to how decisions are made. Copies will be provided to ASIC on a quarterly basis.
3. The ASX must make public the nature of potential considerations resulting from the CEO’s appointment to a position on the board of another ASX listed company.
Monitoring and enforcing compliance
1. The participant application process will be reviewed to ensure that:
— appropriate evidence is given to support and application,
— the ASX (rather than the applicant) sets the date for commencement of participation
— more information is given on the management structure, details on the trading and clearing operations including details on outsourcing
— there is sufficient documentation of the above and that there has been appropriate business unit sign off
Report on custody and depository services
In a report titled ‘Report 291: Custodian and depository services in Australia’ which will act as a precursor to a market consultation, ASIC have considered the role of custodians thinking around the safety of the assets held, the duty of care exercised and the internal controls applied. At the end of 2011, approximately AU$1.8 trillion of assets belonging to Australian investors was held in custody and ASIC have predicted this will triple in the next 15 years.
Further consultation will take place on the requirement for custodians to hold AU$5 million in Net Tangible Assets (‘NTA’). The regulator is interested in whether this amount is sufficient given the ‘significant operational risk to which custodians are subject’ and could result in the NTA requirement being increased.
ASIC fees including those for applications for registration and deregistration as an Australian company, company name changes and annual review fees have been increased.
The Australian Securities and Investments Commission have recently undergone steps to start to refine labels and naming conventions for ETFs, making them globally consistent in order to optimize investor understanding. ASIC has made it known that it is working with the ASX to establish a naming convention to demonstrate the true nature of listed products.
At present, product issuers are required to meet specific naming conventions in order to be granted access to the AQUA quotation system.
Australian Market Structure Monthly Newsletter
Source: Thomson Reuters, 2012
Source: Bloomberg, 2012
Source: Thomson Reuters, 2012
Source: Thomson Reuters, 2012
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Fig 5: Equities Volatility - June 2012
Fig 6: Futures SFE-ASX SPI 200 monthly ADT
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18Australian Market Structure Monthly Newsletter
Venue News
Vocus Harbour Crossing
Vocus Communications Ltd has announced the next phase of its Dark Fibre strategy. This comes as they laid down the first dark fibre links spreading across the Sydney Harbour floor.
Two pipes have been laid: one from Dawes Point to Blues Point, and the other Dawes Point to Milsons Point. The cables provide the shortest possible path from the CBD to the new ASX co-location data centre in Gore Hill. The cables are key to Vocus’ plans to become a leading infrastructure provider to the Telco, cloud computing and retail ISP markets.
ASX trader workstation release notes
Users who upgrade to TW version 1.12.2.7523 on Tuesday 12th June will have noticed the following TW enhancements:
Three additional columns appear in the Centre Point Order Book window
— BCond – any order conditions associated with a centre point buy order
— BMAQty – minimum acceptable quantity associated with a centre point block buy order
— AMAQty – minimum acceptable quantity associated with a centre point block sell order
One additional column appears in the Order Book window
— MAQty – minimum acceptable quantity associated with a centre point block order
One additional column appears in the Order History window
— MAQty – minimum acceptable quantity associated with a centre point block order
The release was split into three phrases:
— Phase 1: effective Tuesday 12 June: New ASX Trader Workstation software available
— Phase 2: effective Monday 25 June: ASX Trade Central System upgraded, which provides for the enhancements to the existing Centre Point order types
— Phase 3: effective Monday 2 July: The new Centre Point Block and Sweep order types enabled. The new ASX Trader Workstation software was mandatory from this date
Make sure to read this document to get all of the new changes and new clear instructions
Attachment A to ASX Trade Circular No. 007 Enhancements to ASX Centre Point® Functionality, New Order Types and ASX Trader Workstation Release Notes - Version 1.12.2.7523
ASX Centre Point
ASX is implementing a variety of improvements to Centre Point, including the launch of Centre Point Block, a new service which supports users seeking larger block execution, allowing them to nominate a minimum acceptable fill size for their anonymous block order.
Also, there is the introduction of ‘sweep’ functionality, which seeks meaningful price improvement in Centre Point for marketable orders prior to routing the main market, ASX TradeMatch.
These enhancements were to be launched on 2 July 2012 originally, but have recently been delayed by one week to Monday 9th July 2012.
More information about the new Centre Point functionality can be found in ASX Trade Circular 2012/007.
ASX Trade Circular No.009 - NEW ASX CENTRE POINT® ORDER TYPES - REVISED IMPLEMENTATION DATE
Changes at Chi-X Australia
Option to instruct crossing not to be sent to clearing house - market participants are now able to instruct Chi-X not to send a crossing to the clearing house. The feature is supported in the current trading interface specification and was available for use as of Monday 2 July, 2012.
Changes to tradable securities - Chi-X announced that as of the commencement of trading on Monday 18th June 2012 the securities listed below have been added to the universe of securities available for trading as a result of S&P’s quarterly rebalance of the S&P/ASX200 Index:
CARDNO LIMITED (CDD) into threshold group D
M2 TELECOMMUNICATIONS GROUP LTD (MTU) into threshold group C
Changes to securities available for trade reporting - At present, Chi-X supports trade reporting for the same securities that are available for trading in its central limit order book. As of 9th July, Chi-X supports trade reporting in relation to the full list of cash equities quoted on ASX. The list of securities available for trading in the central limit order book will remain unchanged.
Release of Trade Reporting and Mid-Point enhancements - from 12th June 2012
The below plans were implemented by Chi-X after previously advised in the Market Operations Notice 0004/12 and Technical Notice 0001/12
— Permit full range of trade report types to be lodged with Chi-X
— Provide enhancements to mid-point orders, including the ability to half tick limit price and minimum executable quantity
— Also includes change to daily Securities Master List –CHIXTSL.txt
For Chi-X Australia Market Operations notices see here:
Update of Market Operator rules - on 28th June, Chi-X Australia announced that the following changes to their rules:
— To change the reference price for pegged orders on the Chi-X market from the best bid and offer on the ASX’s TradeMatch venue to the national best bid and offer (“NBBO”)
— Use consistent terminology in the Procedures when referring to trading phases
— Clarify the time by which transactions executed after the end of the post trading administration phase must be reported
These amendments were made effective from Monday 2 July, 2012.
3rd Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2012) held in Singapore
The Monetary Authority of Singapore officially supported the 3rd annual World Islamic Banking Conference – Asia Summit in Singapore. MAS chairman Mr. Ravi Menon kicked off the proceedings with his keynote address where he emphasised the expanding role of Islamic finance as a conduit for trade and capital flows between Asia and the Middle East. He also highlighted the need for the industry to gain roots in major financial centres.
“Islamic finance has come a long way but now the industry must overcome the challenges posed by slower growth and global deleveraging, and build scale and reach critical mass. This requires financial institutions, regulators, and international standard setting agencies to work closely together.” Mr. Menon said.
On future growth areas he said “Islamic finance should diversify into growth areas such as trade and infrastructure financing, where demand is still strong, especially in emerging economies. Islamic banks are well positioned to reach out to new customers who are in need of financing as many global institutions pull back on their lending due to the need to repair their balance sheets.”
The risks arising out of an escalation of the Eurozone crisis were noted as the biggest threat amid a slowing world economy.
Singapore and Thailand establish a reciprocal cross border collateral arrangement
The Monetary Authority of Singapore (‘MAS’) and Bank of Thailand (‘BOT’) have signed a Memorandum of Understanding (‘MoU’) to reach a cross-border collateral pact which will help maintain financial stability in both countries. This arrangement both strengthens and reinforces the growing trade, investment and financial relationships between Singapore and Thailand.
This will enable the eligible financial institutions operating in Singapore to obtain SGD liquidity from MAS by pledging Thai baht or Thai government and central bank securities with the MAS and vice versa and allow financial institutions in both countries greater flexibility in their liquidity management.
MAS to set up a representative office in Beijing
The Monetary Authority of Singapore (‘MAS’) is going to set up its first overseas representative office within Asia in Beijing soon. MAS and People’s Bank of China (‘PBoC’) have signed an agreement to this effect. MAS said this would further strengthen bilateral cooperation between MAS and PBoC, as well as with other Chinese financial authorities.
Personnel Changes
SGX CEO Magnus Bocker gets extended term
The Singapore exchange has announced the renewal of the service contract of its Chief Executive Officer (CEO) Mr Magnus Bocker till 30th June 2015.
“Given that the tensions and anxieties that have weakened global financial markets are likely to persist for some time yet, we are appreciative that Magnus has signed on for another term in office. He will provide known leadership for the SGX organization in the uncertain times ahead,” said Mr Chew Choon Seng, Chairman of SGX
PSE announces appointment of Mr. Roel Refran as the new COO
The PSE has appointed its former legal counsel Mr. Roel A. Refran as its new Chief Operating Officer (‘COO’). The position was vacant since July 2010. The COO will be responsible for the market operations and corporate services divisions, which cover the trading operations and control, broker systems and certification, trading development, corporate planning and research, public and investor relations and data management departments.
IDX re-elects Mr. Ito Warsito as CEO; announces 6 directors
Mr. Ito Warsito has been retained as the CEO of the Indonesia Stock Exchange (IDX) for his second three year term. The move comes at a time when Indonesia is undergoing a restructuring of its regulatory landscape with OJK, the newly constituted regulatory body slated to take up the banking and markets regulatory responsibilities from Bank Indonesia and Bapepam-LK starting next year. Having Mr. Ito to continue in the current role is expected to smooth the transition.
The IDX also announce the appointment of the following directors. Hoesen was named director of valuation; Uriep Budhi Prasetyo as director of supervision; Samsul Hidayat as finance director; Friderica Widyasari Dewi as develoment director; Adikin Basirun as director of risk management and information technology; and Hamdi Hassyarbaini as human development director.
Venue News
SGX commences dual currency trading for ETFs
The Singapore Exchange launched dual currency trading for ETFs to allow flexibility to investors to trade foreign-exchange denominated ETFs in Singapore dollars. The ETFs will be fungible and can be bought and sold in any of the two applicable currencies.
“With this new offering from SGX, investors can enjoy trading flexibility and cost efficiency while benefitting from investing in ETFs. Issuers will also benefit from a wider pool of investors as those who prefer to trade in Singapore dollars enter the market.” - Mr Nels Friets, Head of Securities at SGX said
SGX has worked with issuers to offer the following ETFs:
— CIMB ASEAN 40 ETF
— CIMB S&P Ethical Asia Pacific Dividend ETF
— iShares Barclays Capital Asia Local Currency 1-3 Year Bond Index ETF
— iShares Barclays Capital Asia Local Currency Bond Index ETF
— iShares Barclays Capitial USD Asia High Yield Bond Index ETF
— iShares J.P. Morgan USD Asia Credit Bond Index ETF
— iShares MSCI India Index ETF
SGX seeks public comments on proposed mainboard rules for mineral, oil and gas companies
The Singapore Exchange has released a consultation paper seeking comments on its proposal to relax certain listing criteria to enable
some mineral, oil and gas exploration companies to list on the bourse’s mainboard. This is expected to augment Singapore’s position as a commodity trading, financing and risk management hub in the wake of increased competition between international venues.
Below are the key conditions which are a part of the stringent listing requirements proposed by SGX which companies will be required to fulfill
— should have a market capitalisation of atleast $300mn based on the issue price and post-invitation issued share capital if they are non-producing
— should have adequate working capital for at least 18 months after listing
— will have to declare plans and milestones and relative capital expenditure in advancing to production stage which must also be substantiated by an independent qualified expert
— must have reached at least “indicated resources” stage for minerals or “contingent resources” stage for oil and gas as certified by an independent qualified expert and in accordance with internationally recognised standards
— will have to disseminate quarterly reports on their projected use of funds, and updates on their exploration and extraction activities
The consultation is open till 20th July and can be accessed on SGX website here
BT chosen to connect SGX’s London and Chicago hubs
The Singapore Exchange has announced that it has partnered with BT Radianz network to provide access and connectivity for its new trading hubs established in London and Chicago. The hubs start functioning from July 2012 and will offer SGX customers in London and Chicago a cost-effective and managed connectivity service linking them to Singapore.
“The hubs - beginning in London and Chicago - plus the connectivity alliances we are building with other exchanges and partners will deliver unparalleled access into Asia for international investors. We are delighted that BT will play an integral part in our connectivity initiative.” Mr Muthukrishnan Ramaswami, president of SGX, said.
Bursa Malaysia introduces STP for Central Depository System and a new website
Bursa Malaysia launched the Straight-Through Processing (‘CDS-STP’) facility for its market participants to better manage transactions performed by Central Depository System (‘CDS’) account holders. The first phase implementation will allow clients trading through the internet to monitor their updated CDS account balances and minimise the risk of overselling their positions. The complete solution is expected to be implemented by December and will allow market participants to receive intraday updates on the changes in shareholding positions as well as to automate data entry on selected CDS transactions.
“The introduction of CDS-STP is aimed at enhancing the overall efficiency of CDS operations in the industry as it is able to handle high volumes of transactions at increased speed and accuracy. This will reduce operational risks and data entry errors, as well as enhance the interface connectivity between the back offices of market participants and the CDS operations of Bursa Malaysia.” - Dato’ Tajuddin Atan, CEO - Bursa Malaysia, said.
Bursa also launched their new enhanced website which is divided into a corporate and a market section, differentiating its role as a stock exchange and a listed company. Other additions include faster and easier search functions for stock prices, all-in-one listed company profile pages and improved classification of information.
21ASEAN Market Structure Monthly Newsletter
Malaysian Derivatives markets to grow more attractive
The exchange traded derivatives platform of Bursa Malaysia has been steadily growing both in terms of quality and quantity. The volumes are expected to grow by 50% by EOY 2013 according to a TABB report. The growth has been further accelerated by the association with the CME group and the recent enhancements announced by BMD (introduction of new settlement & clearing system and induction of new KLCI futures contracts).
The platform is able to attract foreign participants due to its association with the CME group and it is expected to increase further once CFTC approves the DMA access for US traders to Malaysian derivatives platform through Globex (CME’s trading API).
Bursa Malaysia set to outperform HK in terms of international listings
Malaysia will pull ahead of Hong Kong as the largest market for international IPOs within Asia once the listing of two of its largest government-linked companies (Felda Global and Integrated Healthcare Holdings) is complete. The two IPOs combined are estimated to raise about $5.2bn. So far this year, Malaysia has had 47 listings that have raised $1.9bn while HK on the other hand has raised $1.4bn via 20 IPOs, according to Dealogic.
The Eurozone crisis and global economic slowdown has had little effect on the listings as both issues have secured over a dozen “cornerstone” investors between them, including BlackRock, Och-Ziff Capital Management, insurance group AIA, and sovereign wealth funds in Qatar and Singapore.
Thailand mulling a separate board for SMEs
The Securities and Exchange Commission (‘SEC’) is considering another stock trading board to enable Small and Medium Enterprises to tap capital markets for their funding requirements. The idea is being studied currently and if materialised, the new board will be created under the Stock Exchange of Thailand (‘SET’) and will only allow institutional investors and sophisticated individual investors (accredited investors) to participate. The listing and reporting rules for SME’s will be more flexible compared to the mainboard on SET.
“We will complete all details for this plan and hope the plan can be implemented without constraints so the SMEs can use the capital markets as an alternative financial resource” said Dr Vorapol, Secretary-General of the SEC.
Philippines Stock Exchange seals vendor for online trading technology
PSE has signed an agreement with N2N Global Solutions Sdn. Bhd., a wholly-owned subsidiary of Malaysian-listed securities trading solutions provider N2N Connect Berhad, to provide software solutions to enable online trading for clients of accredited traders and brokers in the Philippines market.
The Malaysian company will also provide trading terminals for dealers and traders and the more sophisticated clients, as well as direct marketing access with automated order taking facility and algorithm trading for clients who want fast execution of orders with low latency.
The solution is expected to be implemented within three months.
Global Market Structure APAC Quant Analysis Factsheet - June 2012
Below is a selection of quantitative metrics, which provides additional analysis of the markets and liquidity during June 2012. For further information, please contact:
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