Deutsche Bank
Equities
Global Market Structure
Asia Pacific Newsletter
Issue 19, 2012
Welcome to the APAC Market Structure Newsletter containing
the news relating to market microstructure,exchange updates
and regulatory developments.
Hong Kong . ...............................................Page 2
SFC consultation on Electronic Trading
2011 Fund management survey released
China...........................................................Page 5
New QFII rules published
Further cuts to trading fees approved
Taiwan.........................................................Page 8
Taiwanese banks look for more business in mainland China
TWSE propose new short sell control
India............................................................Page 10
Documentation for DMA trading relaxed
Nifty stocks attract record FII investment
Japan..........................................................Page 13
TSE outage due to ‘systems error’
Draft changes to the Companies Act
South Korea................................................Page 15
Hedge fund regulation eased
KRX release Factbook 2011
Australia......................................................Page 17
ASX broaden definition of dark
LCH apply to run clearing house
ASEAN........................................................Page 19
Singapore and Thailand establish a reciprocal cross border
collateral arrangement
SGX introduces dual currency trading for ETFs
Quant Fact Sheet........................................Page 21
Contact:
Email: global.marketstructure@list.db.com Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Hong Kong Newsletter Issue 19
Hong Kong Market Structure Update
Fig 1: Equities Hong Kong market monthly ADT
(lit, auction & non-displayed order types)
10.00
USD$4.12bn
3.94%
Source: Thomson Reuters, 2012
SFC release consultation on the regulation of electronic trading
On 24th July, the SFC released a paper considering the controls that
the regulator feels will provide a framework for Direct Market Access
(“DMA”), internet trading, electronic trading and algorithms. Much of
the paper considers who should be responsible for such orders, the
appropriate level of testing, record keeping and monitoring, and the due
diligence that brokers should perform on their clients.
The paper proposes that all securities listed on an exchange would be in
scope including shares, futures, options, ETFs, warrants and exchange
traded certificates. It would seem from the current drafting that this
would include securities listed overseas as well as in Hong Kong.
Additionally, the paper considers leveraged FX and will update the
Internet Guidance Note released in 1999.
Areas of particular note are that the paper suggests that brokers
would be ultimately responsible for the order sent through by clients
and that they will need to perform due diligence on their clients to
ensure proficiency. The paper does not currently distinguish between
professional and retail investors.
9.00
2011
2012
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Aug
Sep
Oct
Nov
Dec
Source: Thomson Reuters, 2012
Fig 2: Futures HKFE HSI monthly ADT
16.00
2010
14.00
2011
2012
12.00
10.00
8.00
6.00
4.00
2.00
0.00
A brief overview of the proposals is presented below:
Jan
Feb
Mar
Apr
May
Jun
Jul
Nov
Dec
Source: Bloomberg, 2012
Electronic trading
Responsibility
2010
8.00
(USD bn)
%loss/gain
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
An intermediary is ultimately responsible for the for the orders
sent through its electronic trading system (including compliance
of said orders with regulatory requirements)
The same standards apply to all electronic trading systems, whether
developed in-house or externally.
Management and
Supervision
An intermediary is expected to manage and supervise the
design, development, deployment and operation of electronic
trading systems and establish written internal procedures
Adequacy of
system
The intermediary must ensure that its automated trading
system is adequate with regards to controls, reliability, security,
capacity and contingency measures.
https://www.sfc.hk/sfcConsultation/EN/sfcConsultFileServlet?name=etradereg&type
=1&docno=1
Record keeping
The intermediary must ensure that its trading systems keeps
audit trails and records of all system and trading activities for no
less than 2 years.
Conclusion and Supplemental Consultation on OTC Derivatives
Regulation
Risk Management
Intermediaries are responsible for pre-trade controls and posttrade monitoring of client orders
Minimum client
requirements
Intermediaries need to conduct due diligence on clients with
regards to proficiency, regulatory requirements and monitoring
Algorithmic trading
Qualification
Persons involved in design and development of algorithms need
to be suitably qualified.
Testing
Testing procedures need to ensure that algorithms work as
designed, take into account extreme situations and do not
interfere with the operation of a fair market.
Risk Management
Intermediaries need to have controls regarding the operation
and error handling of algorithms, especially the prevention of
manipulative, abusive or erroneous orders
Record Keeping
Intermediaries must keep audit trail records as well as
documentation on reviews and test for no less than 2 years
(USD bn)
In the second paper released on the topic, the SFC and HKMA have
jointly
released
a paper
on the proposed regime for OTC derivatives.
Source: Thomson
Reuters,
2012
The conclusions to the previous consultation focused on the licensing
requirements introducing two new types of regulated activities – Type
11 RA for the activity of dealers and advisors and Type 12 RA for the
activities of clearing agents – as well as introducing a requirement for
positions over a specified threshold to be reported to the SFC.
The current consultation goes into further detail on the responsibilities
and scope of the new regulated activities and thinks about the impact on
the Type 7 – the Alternative Trading System license – definition which will
be updated to include OTC derivatives.
(USD bn)
Internet trading and DMA
The deadline for submission is 24th September. Further information can
be found here:
Responses are to be submitted to the SFC by 31st August. For the full
consultation click here:
https://www.sfc.hk/sfcConsultation/EN/sfcConsultFileServlet?name=otcregsupp&typ
e=1&docno=1
Source: Thomson Reuters, 2012
Hong Kong Market Structure Monthly Newsletter
3
Fund Management Activities Survey 2011 released
Dividend futures market
An annual survey of the SFC showed that assets under management
of Hong Kong’s fund management industry dropped by 11% or HK$1.2
trillion to HK$9 trillion in 2011. The proportion of overseas investors has
remained steady over the past five years - they contributed more than
60% of the total fund management business. The below graph is taken
from the SFC report:
Trading in dividend futures increased in the second quarter, with the
HSCEI futures setting records in contracts traded and open interest.
Volumes increased eight times compared to the previous year.
HKEx published its “Guide on Enhancing Regulation of the Listed
Structured Products Market” on 27th July. The guide covers several
regulatory enhancements including issuer control enhancements,
improvement of liquidity provider standards and management of issuer
credit risk.
Chart 1: Combined Fund Management Business ($bn)
11,000
Combined Fund Management Business ($ bn)
10,000
Trailing three- year average ($ bn)
9,000
Guide on Enhancing Regulation of Listed Structured Products
8,000
7,000
6,000
5,000
4,000
The guide can be found here:
3,000
2,000
1,000
-
2007
2008
2009
2010
2011
http://www.hkex.com.hk/eng/rulesreg/listrules/listguid/Documents/guideline0712.pdf
Trading halts proposal
Further information can be found here:
http://www.sfc.hk/sfc/doc/EN/speeches/public/surveys/12/fmas_201207.pdf
The HKEx has published a paper on trading halts during market hours to
allow companies to publish price-sensitive information (“PSI”). Currently,
companies are not allowed to publish PSI during market hours; if
disclosure is mandatory, trading stops and can only resume on the next
trading day. An intermittent trading halt with a subsequent continuation
of trading would enhance flexibility, maximize trading time and bring the
HKEx in line with other international exchanges.
Hong Kong Central Bank QFII quota increased
In detail, key proposals included are:
The QFII quota of the Central Bank of Hong Kong has been increased to
US$1bn from US$300mn. This increase will allow greater investment in
both the equity and bond markets.
Securities market
Coverage of RMB equity trading support facility extended
The coverage of the Trading Support Facility (TSM) will be extended on
6th August to cover ETFs and REITS. The China AMC CSI 300 Index ETF
and the Hui Xian REIT will be the first securities to be covered. The foreign
exchange rates and fund balances can be found on the front page of the
HKEx website for reference.
The TSF leaflet provides more information on the facility and can be
accessed here:
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/120730news.htm
Venue News
HKEx takeover of LME
The ordinary shareholders of the LME approved the takeover bid of the
HKEx on 25 July. Despite some concern from industrials, the majority
of shareholders (99.24%) were in favor of the transaction. The LME,
which handles more than 80% of world-wide metal futures trading, is
the first overseas acquisition for the HKEx. As previously mentioned, the
HKEx has committed to keep the LME’s structure, including the ring and
open-outcry-system, warehousing network and contract date structure,
unchanged until at least 2015. One way the HKEx is planning to generate
new revenue from the takeover is to license the LME base metal index
LMEX to partner stock exchanges in Brazil, Russia, India, China and
South Africa. The HKEx also plans to introduce a new iron ore contract
to cater to demand for industrial material in China. These steps are
important as some in the market have voiced concern that the HKEx has
overpaid for the LME.
Related to the acquisition, the HKEx intends to launch a new platform
offering commodity trading and settlement within the Asian time zone.
Further information can be found here:
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/120725news.htm
— Timing for lifting of trading halts: Share trading will not resume until at
least 30 minutes after the PSI announcement is published on the HKEx
news website. Any trading resumption will take place on the quarter
hour or the half hour.
— Mid-session auctions upon lifting of trading halts: To facilitate price
discovery, a 10-minute single-price auction will take place in the
securities market for the relevant shares and structured products upon
the lifting of a trading halt
— Minimum trading time after lifting of trading halts: There must be at
least 30 minutes of trading (10-minute auction and at least 20 minutes
of continuous trading) after the lifting of a trading halt. Therefore, the
latest trading resumption before the end of the trading day would be
3:30 pm on a normal trading day
— Order handling: All existing orders in the securities market (including
orders for the company’s shares and any related structured products)
entered before a trading halt are to be cancelled automatically by the
Stock Exchange at the time of halt
Derivatives market
— HKEx’s stock options / stock futures order handling practices
will remain unchanged. All outstanding orders will be purged
automatically by the trading system at the time trading of the
underlying shares is halted.
— There will not be a mid-session auction for stock options / stock
futures. Trading of related stock options and stock futures will resume
upon the completion of the mid-session auction for the underlying
shares (the mid-session auction is described above).
Responses are due by 8th October, the full paper can be accessed here:
http://www.hkex.com.hk/eng/newsconsul/mktconsul/Documents/cp201207.pdf
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Hong Kong Market Structure Monthly Newsletter
4
Market Share Report
Initiatives
The HKEx have released a summary of the market share between the
difference participants. The categories are defined as follows:
The HKEx published an update to the following initiatives:
— Category A: Position 1 – 14
— Consultation on the placing of IPO shares
— Category B: Position 15 - 65
— Reporting on environmental and sustainability issues
— Category C: Over 65
Category A
(Position 1 to 14)
— Possible changes to the requirement for listing of overseas companies
— Simplification of prospectuses
Category B
(Position 15 to 65)
— Study on after-hours futures trading
Category C
(Position > 65)
— Exploration of new financial products and services
Date
Range (%)
Total
(%)
Range (%)
Total
(%)
Range (%)
Total
(%)
Total
Turnover
($Bil)
Average
Daily
Turnover
($Mil)
JUL 11
6.85 - 2.59
54.80
2.27 - 0.23
34.41
0.22 - 0.00
10.79
1,344.50
67,224.81
AUG 11
7.62 - 2.43
55.25
2.38 - 0.21
34.36
0.20 - 0.00
10.39
1,825.18
79,355.45
SEP 11
8.81 - 2.68
56.82
2.46 - 0.19
33.63
0.18 - 0.00
9.55
1,447.05
72,352.66
OCT 11
8.32 - 2.71
57.74
2.33 - 0.21
32.11
0.20 - 0.00
10.15
1,438.81
71,940.49
— Central gateway facility
NOV 11
8.40 - 2.32
59.65
2.09 - 0.20
30.58
0.19 - 0.00
9.77
1,328.40
60,381.74
— New Cash market trading system
DEC 11
8.14 - 2.63
58.78
2.40 - 0.20
31.50
0.19 - 0.00
9.72
947.45
47,372.48
JAN 12
8.26 - 2.69
57.52
2.58 - 0.22
32.49
0.21 - 0.00
9.99
1,006.98
55,943.24
FEB 12
7.01 - 2.55
55.83
2.37 - 0.21
33.33
0.21 - 0.00
10.84
1,444.02
68,763.06
MAR 12 6.81 - 2.61
58.06
2.41 - 0.19
32.17
0.19 - 0.00
9.77
1,436.19
65,281.56
APR 12
6.88 - 2.70
58.23
2.48 - 0.20
32.17
0.19 - 0.00
9.60
910.17
50,565.13
MAY 12
8.52 - 2.83
58.79
2.69 - 0.18
32.12
0.17 - 0.00
9.09
1,215.92
55,268.90
JUN 12
8.44 - 2.92
58.28
2.84 - 0.20
32.63
0.19 - 0.00
9.09
965.79
5,990.09
Past 12 Months Total ($ Bil)
15,310.46
Monthly Average ($ Bil)
1,275.87
— Consultation on a scripless securities market
— Next generation market data system
— Establishment of clearing house for OTC derivatives
— Technology upgrade for derivatives market system
Further information can be found here:
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/1207162news.htm
Personnel changes
The contract of Mark Dickens, Head of Listing, has been renewed by
HKEx for one year to 2013. Apart from his role he is expected to identify a
successor for his role.
Sources
Short selling
www.reuters.com
HKEx issued a change of designated securities for short selling on 27th
July. 17 stocks have been added to the list while 104 have been removed.
www.sfc.hk
For the full list of securities, click here:
www.hkex.com.hk
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/120720news.htm
RQFII ETF listing
The first RMB Qualified Foreign Institutional Investor (RQFII) A-share
exchange traded fund (ETF) has listed on the HKEx. It provides direct
exposure in A-shares to outside investors and is the first A-share ETF
to trade in RMB outside mainland China. The market sees this ETF as
the beginning of a development to further strengthen the position of
the financial market of Hong Kong as an access point to trade mainland
A-shares. The ETF raised 6 times the assets of synthetic products tracking
the same index.
www.bloomberg.com
http://uk.reuters.com
http://www.chinadaily.com.cn
www.ft.com
http://derivative-news.fincad.com/
http://www.metalbulletin.com/
http://in.reuters.com/
http://www.thestandard.com.hk
Further information can be found here:
http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/1207163news.htm
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Chinese Newsletter Issue 19
Chinese Market Structure Update
Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types)
70.00
60.00
USD$17.78bn
4.65%
50.00
Aug
Sep
Oct
Nov
Dec
Shanghai
Shenzen
6.00
4.00
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
0.00
04-July
2.00
Source: Thomson Reuters, 2012
Fig 3: Futures HKFE HHI monthly ADT
5.00
4.50
AUM >= USD 10 billion
AUM >= USD 5 billion
3.50
Net Asset >= USD 1 billion
Net Asset >= USD 500 million
Years of Business Experience
> 5 years
Years of Business Experience
> 2 years
AUM >= USD 5 billion
AUM >= USD 500 million
Years of Business Experience
> 5 years
Years of Business Experience
> 2 years
AUM >= USD 5 billion
AUM >= USD 500 million
Globally top 100 in terms of total
Assets
Years of Business Experience
> 10 years
AUM >= USD 10 billion
AUM >= USD 5 billion
2010
2011
2012
4.00
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg, 2012
Fig 4: Futures Daily Turnover per venue - July 2012
Tier-1 asset >= 1billion
14.00
Years of Business Experience
> 5 years
Years of Business Experience
> 2 years
12.00
AUM >= USD 5 billion
AUM >= USD 500 million
— Application process eased by adding online documentation features,
Jul
8.00
Years of Business Experience
> 10 years
HKFE HHI
SGX FTSE China A50
10.00
8.00
6.00
4.00
2.00
Source: Bloomberg, 2012
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
0.00
11-July
— 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.
Jun
10.00
Years of Business Experience
> 30 years
— Investment scope for QFII expanded to include exchange traded
stocks/bonds/warrants and Interbank market’s fixed income
instruments.
May
12.00
10-July
Other
Institutional
Investors
Apr
09-July
Commercial
Banks
Mar
14.00
02-July
Insurance
Companies
Feb
16.00
(USD bn)
Fund
Managers
Jan
Fig 2: Equities Daily Turnover per venue - July 2012
(USD bn)
Securities
Companies
0.00
Source: Thomson Reuters, 2012
06-July
— As per the summary in Issue 18 of the newsletter, lower requirements
for applicants
are:
Investor
Current Rules
Drafted New Rules
10.00
05-July
— Each QFII can appoint 3 brokers in each market, up from the current
one broker requirement. However, the practical implementation
depends on the account opening framework which is still being
finalized by CSRC and SAFE.
20.00
03-July
— Each QFII should open sub-accounts for its prop trading activities and
client trading activities. When QFII opens accounts for its customer
the name can be “name of QFII + name of customer”. While the
customers are long term investors such as mutual fund, insurance
companies, pension funds, endowment fund, charitable foundation,
and sovereign funds, the assets should be segregated from QFII and
its custodian. In terms of how the “sub-account” can be opened and
how to allocate the QFII quota to each sub-account, CSRC is expected
to lead a conversation with CSDCC and SAFE shortly.
2012
30.00
04-July
Further to our report last month on the public consultation of new QFII
rules by CSRC, on 27th July 2012, CSRC published on their website
the finalised version of “Provisions Concerning Issues Related to the
Implementation of the Administrative Measures for Securities Investments
in China by Qualified Foreign Institutional Investors” (合格境外机构投资者境
内证券投资管理办法). The main points are summarised below.
2011
40.00
02-July
CSRC published the finalised new QFII rules
2010
03-July
Source: Thomson Reuters, 2012
(USD bn)
%loss/gain
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
Chinese Market Structure Monthly Newsletter
for application process details please contact us and happy to direct to
our custodian department for further information.
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.
A copy of the official CSRC rules (Chinese only) can be found here:
http://www.csrc.gov.cn/pub/zjhpublic/G00306201/201207/t20120727_213211.htm
Two new QFIIs licenses approved by CSRC in June
On CSRC’s website, it has been announced that the following 2 entities
have been granted approval for QFII licenses:
1. ING Investment Management Aisa Pacific (Hong Kong) Limited
2. Mitsubishi UFJ Asset Management Co.,Ltd
The exact amount of quota is yet to be approved by SAFE.
US$1.2 billion quota approved by SAFE for 10 QFIIs
The following 10 entities have gained quota from SAFE reaching a
combined value of US$1.35 billion.
1. Van Eck Associates Corporation (US$100 million)
2. William Blair & Company, L.L.C. (US$100 million)
3. Hong Kong Monetary Authority (Additional US$700 million)
4. Templeton Investment Counsel, LLC (Additional US$ 100 million)
5. Korea Investment Trust Management Co., Ltd (US$100 million)
6. Manulife Asset Management (Hong Kong) Limited (US$100 million)
Currently a total quota of US$28.53 billion has been granted to 149 QFIIs
including Hong Kong’s central bank that now has US$ 1 billion to invest
in equity and bond markets.
CSRC issued public consultation paper on listed company’s
employee equity enrollment plan; stock markets react positively
On 4th August 2012, CSRC published on their website the public
consultation paper on listed company’s employee equity enrollment plan.
According to the drafted rules, employees of listed companies can receive
incentives in stock forms for no more than 30% of total compensation.
The shares must be purchased through secondary market. The restricted
selling span shall be no shorter than 36 months and limit of total
employee stock plan shall not exceed 10% of total company capital while
for individual employee the limit is 1% (excluding shares acquired through
pre-IPO allocation, employee’s self action in secondary market and
management equity incentive plan).
According to Bloomberg, this change has contributed to the near recent
market rise of nearly five weeks.
“More listed companies and their employees are likely to buy their own
shares as stocks are attractive in terms of valuations and have long-term
investment values”, said Wu Kan, a fund manager who oversees over
RMB 1bio.
A copy of the official CSRC public consultation paper can be found here
(Chinese only):
http://www.csrc.gov.cn/pub/zjhpublic/G00306201/201208/t20120805_213497.htm
6
Deutsche Bank listed the first China CSI300 ETF in London
Deutsche Bank’s market leading ETF platform “DB X-trackers” has
listed the first China CSI300 Index ETF on the London Stock Exchange,
becoming Europe’s largest China A-shares ETF by AUM.
The DB X-trackers CSI 300 Index ETF currently is listed on HKEx and SGX
while the London listing will be adding a new, additional share class. The
ETF has around £220 million in AUM.
China further cuts interest rates and injects money to
promote liquidity
Further to our report last month on China rates cut, the People’s Bank of
China (“PBOC”) announced that they would cut the one-year benchmark
interest rate by 25 basis points. After the cut, the interest rate for current
deposits has reduced to 0.35% from 0.4%, while the deposit rate has fallen
to 3% from 3.25%. The new rates became effective from 6th July, 2012.
It’s the second rate cut by the central bank this year since 8th June, with
the aim to stimulate economic growth. The Global Times said that PBOC
injected RMB 80 billion into the country’s money market fund with 7-day
reverse repos at 3.35% on 19th July 2012, as a measure to promote
market liquidity.
Bank of Korea (“BOK”) approved to invest in RMB bond market
The South Korea’s central bank has been approved by China to invest in
RMB bond market for up to RMB 20billion (around USD 3billion) and the
process has already started. In addition to that, BOK was recently granted
QFII quota worth US$300million, which can also been invested in China’s
domestic stock market.
“We want to diversify our investment portfolio and the RMB is a good
choice compared to other currencies.” A BOK official said.
China to open doors for hedge funds
As reported by Financial Times, China has indicated they will give foreign
hedge funds permission to raise funds from onshore China.
The program, called the Qualified Domestic Limited Partner program
will provide a new channel for domestic capital to flow abroad, and
also an opportunity for Chinese wealthy citizens and institutions to seek
alternative returns such as arbitrage and short selling strategies.
Like other reforms in China, this hedge fund reform will start cautiously.
Licenses to operate in China will be issued in Shanghai only to the
world’s largest hedge funds with AUM over US$10 billion, and there will
a limit of US$5 billion of total quota which can be raised collectively by
licensed funds.
It has also been reported that hedge funds are already queuing to apply,
as the US$5 billion will not be split evenly between funds but divided
competitively.
SAFE to relax the Foreign Direct Investment rules
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 previous comments in Issue 16 that regulators are
pledged to loosen controls over the foreign direct investment that have a
“genuine” background.
SAFE to invest US$500 million in Blackstone property fund
The China Daily stated that China is diversifying its foreign reserves
with SAFE putting US$ 500 million into a property fund managed by US
based firm Blackstone. China is currently the largest foreign holder of
Chinese Market Structure Monthly Newsletter
US Treasuries, with around 30% of its foreign reserves allocated to these
bonds with a further 20% invested in euro-denominated assets.
“It’s always welcome that SAFE could set different layers to its
investment of foreign reserves, and setting aside such a small proportion
for high-return but high-risk investment is necessary,” said Chen Daofu,
policy research chief of the Financial Research Institute at the State
Council’s Development Research Center.
Venue News
CSRC announced further trading cost reduction
On 12th July, CSRC announced it was given approval by the National
Development and Reform Commission and Ministry of Finance (MoF) to
reduce the CSRC fee charged on securities and futures trading activities
by 50%. Please find the details below:
1. CSRC fee levied on Shanghai Stock Exchange and Shenzhen Stock
Exchange is reduced from 0.004% to 0.002% of annual trading value
for stocks. In addition, securities investment funds and bonds are
exempted from CSRC fee.
2. CSRC fee levied on Shanghai Futures Exchange, Zhengzhou
Commodity Exchange, and Dalian Commodity Exchange is reduced
from 0.0002% to 0.0001% of annual trading value. The same fee
standard also applies to CSRC fee levied on China Financial Futures
Exchange.
7
H-shares ETFs approved to be listed in SSE and SZSE
Further to Issue 18 where the first two cross-border ETFs listed
in Shanghai and Shenzhen Stock Exchanges were detailed, 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.
Source:
www.szse.cn
www.sse.com.cn/
www.csrc.gov.cn/
www.reuters.com
www.chinadaily.com.cn
www.tax-news.com
www.safe.gov.cn
www.marketwatch.com
The validity of the above new fee standard is three years.
A few media sources such as China Post reported a further trading
cost reduction is still possible and to be announced in September, the
reduction rate will be in the range of 20%. Reuters estimates that the
reduction will result in savings of RMB 15.5 billion this year.
SSE and SZSE announced further details on delisting rules
www.reuters.com
http://www.globaltimes.cn
www.bloomberg.com
www.etfstrategy.co.uk
www.derivative-news-fincad.com
www.newstatesman.com
www.ft.com
Shanghai Stock Exchange (“SSE”) announced the details of proposed
delisting guidelines as below:
www.usa.chinadaily.com.cn
— Listed companies operating at losses for two consecutive years will be
labeled “ST shares” (special treatment) and those operating at losses
for three consecutive years will be marked “*ST shares”.
www.chinapost.com
— It is proposed that the daily price upper limit of “ST shares” will be
adjusted to 1%, while the price down limit will be narrowed to 5%.
www.chinascopfinancial.com
www.businessweek.com
www.china.org.cn
www.english.cri.cn
— For A shares with closing price below RMB 0.5, the daily price upper
limit will be proposed to 2%, while for B shares market stock with
closing price below RMB 0.05, the upper limit will be capped at 20%.
— On the risk warning board, the daily price change limit for “*ST
shares” will remain at 10% (same as ordinary shares).
— “*ST shares” under delisting procedures will be delisted after being
traded on the risk warning board for 30 trading days.
The new measures are proposed to better protect investors and prevent
market speculation.
The Shenzhen Stock Exchange (“SZSE”) announced on their website
for completion of the technical preparations to ensure smooth delisting
procedures (“做好上市公司退市技术准备”).
The delisting system will adopt a so-called ‘rectification period’ system.
After trading of a company’s stock is suspended, the company will be
given a 30-day delisting ‘rectification period’ on a delisting rectification
board, after which, the stock will exit the stock exchange.
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Taiwan Newsletter Issue 19
Taiwan Market Structure Update
Fig 1: Equities Taiwan market monthly ADT
(lit, auction & non-displayed order types)
5.00
Taiwanese banks looking for more business in mainland China
0.00
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Fig 2: Cash Equities Daily Turnover per venue - July 2012
3.50
Taiwan
3.00
ROC OTC
2.50
2.00
1.50
1.00
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
04-July
0.00
03-July
0.50
Source: Thomson Reuters, 2012
Fig 3: Futures FTX TAIEX monthly ADT
9.00
2010
8.00
2011
2012
(USD bn)
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg, 2012
Fig 4: Futures Daily Turnover per venue - July 2012
8.00
SGX MSCI Taiwan
7.00
FTX TAIEX
6.00
5.00
4.00
3.00
2.00
Source: Bloomberg, 2012
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
0.00
09-July
1.00
06-July
According to Taiwan’s Ministry of Finance, the proposed capital gain
tax may affect 10,000 investors and raise around TW$ 11 billion. There
have been constant modifications to the proposed plan previously,
while 13% (nearly TW$ 3 billion) of the stock exchange’s market value
has evaporated since the first government panel tax discussion on 28th
March, 2012. The former finance minister Christina Liu resigned as a
result of the tax plan.
Feb
05-July
The second phase starts in 2015 when individual investors with
transaction volume over TW$ 1 billion will also be subject to CGT of 15%.
Domestic Institutions are subject to minimum tax of 12-15% with an
exempt amount of TW$ 500,000. Stock retained for the holding period of
over 3 years gets 50 % discount on tax rate.
Jan
Source: Thomson Reuters, 2012
(USD bn)
Under the plan, a two phase scheme will be adopted - the first phase is
to tax on withholding basis. For 2013 and 2014, only if the benchmark
index rises up 8,500 or higher, investors will need to pay the withholding
tax at a rate between 0.02% and 0.06% on stock trade. And for investors
who sell more than 10,000 initial public offering shares, over 100,000
shares in emerging stocks, unlisted companies and non- Taiwanresidents are subject to the second track of taxation. Investors will have
to pay a 15% tax on capital gains, but they will get a 50% tax discount if
they hold on to their shares for more than a year.
2.00
0.50
Taiwan’s capital gain tax proposal may raise NT$ 11 billion
On 15th July 2012, the parliament approved a controversial bill relating to
tax capital gains on securities investments for local investors, which will
take effect in January 2013. FINIs are exempt from the CGT.
2.50
1.00
(USD bn)
The Bank of China, a mainland firm, has opened a branch in Taipei while
the Bank of Communications is scheduled to open one in July. The
largest Taiwan lender, Bank of Taiwan, has recently been allowed to open
branch in China. The cross-strait bilateral trade reached US$ 160 billion in
2011 and Taiwan’s investment in mainland exceeded US$ 100million.
3.00
1.50
Further to our earlier issues, Taiwan officials are in talks with mainland
counterparties to open the market for Taiwanese banks.
Samuel Hsu, the president of TWSE, said Taiwanese banks are well
experienced at SME loans which can help to serve the real business
industries in China. According to Hsu, there are about 1.2 million smalland-medium companies in Taiwan, and “if China allows more Taiwanese
banks to provide services in its market, I am sure that the banks will be
able to share their experiences with their Chinese counterparts and grow
with the mainland market”.
2012
3.50
04-July
Source: Thomson Reuters, 2012
2011
4.00
02-July
4.11%
03-July
USD$2.05bn
4.50
02-July
%loss/gain
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
Taiwan Market Structure Monthly Newsletter
Venue News
TWSE reiterates FINI’s 30% rule on non-equities investments
On 30th July 2012, the TWSE on its website reiterates FINIs should
monitor their non-equities investments on a daily basis to ensure the
ratio of FINI’s non-equities investments does not exceed 30% of their net
remitted-in capital.
TWSE proposed new short sell control enhancement
One 17th July 2012, the TWSE announced the proposed short sell rule
with the outline below:
1) After the short sale trades are executed, the execution brokers shall
check with the lending parties and confirm that the Stock Borrow Loan
(“SBL”) can be transferred into the client’s TDCC/custodian account
on the same day. The lending parties shall ask for the client’s consent
that the execution brokers are allowed to check and verify the SBL
information as to the short sale orders they received.
2) Lending parties shall accept execution brokers’ checking requests for
SBL information and confirm whether or not the short sale quantities
exceed the borrowed positions. If the lending parties receive checking
requests on a same stock loan from different execution brokers, they
shall monitor whether or not the aggregated numbers of the checked
SBL exceed the numbers of the real positions borrowed by the client, in
order to provide the correct information.
3) If the FINI borrower defaults trade settlement with the same securities
firm; or fails to repay loans/financing from the same securities firms;
or fails to complete settlement on futures contract, the securities firm
shall notify the FINI to liquidate its outstanding SBL transactions on the
following business day, and then close the FINI’s SBL trading account
accordingly.
4) If the FINI borrower fails for repay loans/financing or defaults at another
securities firm, securities finance enterprises or futures commission
merchant (FCM), the FINI will be suspended from SBL trading with all
securities firms or securities finance companies. However, the borrower
is still able to rollover existing loans, return borrowed securities or swap
SBL collaterals.
9
3.2 Lending parties shall accept execution brokers’ checking requests for
SBL information and confirm whether or not the short sale quantities
exceed the borrowed positions, and, if yes, notify the execution
brokers to control the potential risks; if the lending parties receive
checking requests on a same stock loan from different execution
brokers, they shall monitor whether or not the aggregated numbers
of the checked SBL exceed the numbers of the real positions
borrowed by the client, in order to provide the correct information.
4. Brokers must retain the “Relevant SBL Information” as below:
4.1. voice recording for those provided through telephone calls;
4.2. electronic archived if they are provided via electronic media, e.g.
email, Bloomberg, etc.
4.3. hard copy retention for those provided by written format
(including fax).
5. Brokers shall follow the below rules:
5.1 brokers shall make relevant internal policies to review and rate
clients’ risk for short sale trades in very prudential manner; if a client
short sells the number of shares over the numbers of the borrowed,
the broker shall reinforce the control on such client’s trading
activities, for maintaining market order.
5.2 brokers shall retain the “Relevant SBL Information” for a minimum
period of 1 year, but in case of any client dispute, the information
shall be retained till the dispute is settled.
6. The letter issued on 17 January 2009, with Ref. No. of 0980200259 is
abolished with immediate effect.
Source:
www.twse.com.tw/ch
www.focustaiwan.tw
www.taipeitimes.com
www.bankingtechnology.banking-business-review.com
Appendix:
Below is a Deutsche Bank translation of the Chinese original version. This
is for general information purposes and should not be considered legally
reliable. An English translation of the TWSE letter has been done by our
Taiwan colleague for your easy reference.
1. When brokers receive clients’ short sale orders as described by
the subject Sub-paragraph 10: “Brokerage orders to sell securities
the borrowing of which has been confirmed but that have not yet
been remitted in.”, the brokers need to prior confirm which day
the borrowed position will be transferred into the client’s TDCC/
custodian account, i.e. on T or T+1, and ask the clients to provide
“Relevant SBL Information” and agree the broker to verify the
information provided.
2. If the transferred day is T+1, then Article 13-1 of “Operating Rules
for Securities Lending by Securities Firms” and Article 24 of “Taiwan
Stock Exchange Corporation Securities Borrowing and Lending
Rules” shall be followed.
3. If the transferred day is T, the rules are listed as below:
3.1. After the short sale trades are executed, the execution brokers
shall check with the lending parties and confirm that the SBL can
be transferred into the client’s TDCC/custodian account on the
same day; the lending parties shall ask for the client’s consent
that the execution brokers are allowed to check and verify the SBL
information as to the short sale orders they received; and
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Indian Newsletter Issue 19
Indian Market Structure Update
Fig 1: Equities Indian market monthly ADT (lit & auction types)
6.00
USD$2.08bn
0.57%
Source: Thomson Reuters, 2012
Documentation requirements for DMA trading relaxed
In a circular released on 2nd August, SEBI have removed the requirement
for brokers to require their clients to sign an India specific set of
documents before they can commence trading via Direct Market Access
(or “DMA”). The change has been made ‘in light of feedback received from
the market participants’ to the effect that the requirement to sign a two
way document was inhibiting the take up of the electronic trading service.
Going forward, brokers will need to provide a ‘Terms and Conditions’
notification to the client, the detail of which is set out in the circular. The
exchanges will be able to specify which categories of investors are able to
use DMA, currently it is restricted to institutional only.
The exchanges have been directed to implement the new requirements
and to communicate to SEBI on a monthly basis the status of
implementation.
2010
2011
2012
5.00
(USD bn)
%loss/gain
4.00
3.00
2.00
1.00
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Thomson Reuters, 2012
Fig 2: Equities Daily Turnover per venue - July 2012
2.50
NSE India
BSE India
2.00
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
1.50
1.00
For the full SEBI Circular see here:
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
04-July
2.50
2.00
0.50
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg, 2012
Fig 4: Futures Daily Turnover per venue - July 2012
3.00
NSE Nifty
2.50
SGX Nifty
2.00
1.50
1.00
0.50
Source: Bloomberg, 2012
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
0.00
02-July
SEBI has issued a circular revising the criteria for stocks to be eligible for
trading in the derivatives segment of the Indian market in a bid to curb
manipulation by disallowing illiquid stocks to trade in the Futures and
Options (“F&O”) segment. Only those stocks with a minimum trading
volume of Rs 10 lakh and market wide position limit (“MWPL”) or market
2012
1.00
(USD bn)
SEBI revises eligibility criteria for stocks in the F&O segment
2011
1.50
http://www.moneycontrol.com/news/cnbc-tv18-comments/gaar-committe-to-lookinto-taxationportfolio-investment_737444.html
http://www.moneycontrol.com/news/economy/gaar-guidelines-will-be-finalised-bysept-30-shome_733682.html
2010
3.00
05-July
http://profit.ndtv.com/News/Article/pm-refers-gaar-on-foreign-institutional-investorsto-expert-committee-308566
3.50
04-July
“We have already begun the consultation process quite intensively and
it will be more intensified as we go ahead. We have to put up our views
by the end of August and by the end of September, we should finalise it.”
Dr. Shome said.
Fig 3: Futures NSE Nifty monthly ADT
03-July
Dr. Shome is expecting to finalise the guidelines by 30th Sep. The
committee is also tasked with the evaluation of the retrospective taxation
and indirect transfer of assets amendments proposed in the budget.
Source: Thomson Reuters, 2012
(USD bn)
The new finance minister Mr. P. Chidarambram has appointed an
expert committee under Dr. Parthasarathi Shome, a former adviser to
the finance minister to reevaluate the GAAR proposals. The committee
is currently holding consultations with the industry representatives
to discuss their concerns and provide clarifications on areas where
transparency could be improved. FIIs are seeking an exemption for
portfolio investment from applicability of GAAR.
03-July
0.00
Government sets up a review committee, starts industry
consultations to finalise GAAR proposals
02-July
0.50
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1343901076513.pdf
Indian Market Structure Monthly Newsletter
11
capitalisation of Rs 300 crore would be allowed entry into the F&O segment.
ece?homepage=true&ref=wl_home
For the existing stocks in the segment, the stock will cease to trade if
the minimum Median Quarter Sigma Order Size (“MQSOS”), indicating
its liquidity falls below Rs 5 lakh (down from 10 lakh) or the scrip fails to
maintain a minimum MWPL of Rs 200 crore (up from 60 crore) or its not
able to maintain an average monthly turnover of Rs 100 crore in the last
three months.
http://articles.economictimes.indiatimes.com/2012-07-06/news/32566425_1_e-ipossebi-board-issue-guidelines
“In order to improve market integrity, it has been decided, in consultation
with Stock Exchanges, to tighten the eligibility and exit criteria for stocks in
derivatives segment.” SEBI said.
Following the revision in the criteria, NSE has excluded 51 stocks from its
derivatives segment and the BSE, 52 stocks.
The SEBI circular can be found here:
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1343043461941.pdf
http://articles.economictimes.indiatimes.com/2012-07-26/news/32869458_1_capitalmarket-regulator-sebi-penalty-structure
SEBI cuts time-line for registration of transfer of shares; issues
comprehensive OFS guidelines
SEBI has brought down the time-line for registration of transfer of shares
from the date of lodgment to 15 days from the existing one month. The
timeline will also be applicable to debt securities.
SEBI has also issued a comprehensive set of guidelines related to the
Offer-For-Sale (OFS) mechanism for promoters looking to offload their
stake to comply with the 25% maximum shareholding norm. These
guidelines have replaced the circular issued to this effect earlier.
Source
http://articles.economictimes.indiatimes.com/2012-07-24/news/32827798_1_derivativessegment-illiquid-stocks-stock-futures
The SEBI circulars can be found here:
http://www.business-standard.com/india/news/sebi-tightens-fo-eligibility-criteria/481243/
Source
http://www.thehindubusinessline.com/markets/article3658487.
ece?homepage=true&ref=wl_home
http://business-standard.com/india/news/bse-to-exclude-52-stockstrading-in-slbsegment/180755/on
SEBI Mutual Fund Advisory Committee submits recommendations
The Mutual Fund advisory committee set up by SEBI to study and provide
recommendations in order to revive the ailing industry has provided its
inputs to the board. In the board meeting held on 17th July, the following
recommendations were discussed
— Bring the exit load back into fund investments instead of putting it in
the P&L account of the fund house
— Increasing the expense ratio for funds by 25 bps to 2.5% and enhance
fungibility of its use including making payments to distributors
— Incentivising the expansion of funds in tier 2 and tier 3 cities
The board is yet to decide on the recommendations and is expected to
announce some of the measures to be implemented soon.
http://business-standard.com/india/news/sebi-for-routing-back-exit-load-intoschemes/480740/
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1341486383775.pdf
http://articles.economictimes.indiatimes.com/2012-07-05/news/32551833_1_sebi-acttransfer-process-exchanges-and-market-participants
http://www.thehindubusinessline.com/markets/article3658487.
ece?homepage=true&ref=wl_home
SEBI resets price band for 6 scrips to 5%
SEBI has revised the trading price band for 6 midcap counters to 5%
(from 20%) after it observed high selling activity on these stocks during
the market events on 27th July. SEBI suspects market manipulation
activity behind the >20% decline in the prices of these stocks and is
investigating the matter further. The following are the stocks impacted:
— Glodyne Technoserve Limited
— Radico Khaitan Limited
— Pipavav Defence and Offshore Engineering Company Limited
— Parsvnath Developers Limited
—Tulip Telecom Limited
— Era Infra Engineering Limited
SEBI issues disclosure norms for general insurance IPOs; to release
guidelines on e-IPOs soon
http://timesofindia.indiatimes.com/business/india-business/Sebi-probes-Thursdayscrash-in-mid-cap-segment/articleshow/15219843.cms
SEBI has released the disclosure rules governing the public issuance of
equity by general insurance companies. Following are the highlights: -
SEBI asks exchanges to seek undertakings from brokers / clients to
curb market manipulation
— The company must have a record of profitable operations for at least 3
years prior to the launch of IPO
—R
isks related to the industry in general and specific to the company raising
capital must be declared including the maximum possible loss ratio
— Data pertaining to cross-selling and claims must be declared. Investors
must also be informed about regulatory restrictions on investments
and the impact of any possible default by any re-insurers which could
materially affect the financial condition and results of their operations
The Securities and Exchange Board of India has asked the stock
exchanges to seek an undertaking from brokers and their clients in
cases where the trading activity of an investor or group looks irregular or
suspicious. The clients associated with the suspected trades will have to
state to the market authorities that they are not linked to the promoters of
listed companies they are buying into.
Additionally SEBI has also announced that it will be issuing guidelines for
e-IPOs soon which will enable prospective investors to apply and purchase
the shares of a public issuance electronically. This will help in expanding
the reach of public offerings and is expected to boost the IPO responses.
SEBI and stock exchanges are also planning to modify the listing
agreement to include a provision for imposing financial penalties ranging
from Rs 5,000 to Rs 100,000 on the listed companies which are found
non-compliant with the conditions mentioned in the listing agreement.
There are also suggestions to debar companies and promoter-directors
responsible for non-compliance from the capital markets, freeze their
accounts, or file criminal complaints against them.
http://articles.economictimes.indiatimes.com/2012-07-25/news/32848565_1_offerdocument-irda-catastrophic-risk
http://www.thehindubusinessline.com/markets/article3687541.
http://www.firstpost.com/investing/suspicious-trading-sebi-seeks-declaration-frombrokerages-384155.html
http://indiatoday.intoday.in/story/sebi-cracks-whip-on-rogue-bulls-to-curb-marketmanipulation/1/209521.html
Personnel Changes
SEBI appoints Mr Muralidhar Rao as Executive Director; transfers
140 officers internally
SEBI has announced the appointment of Mr Muralidhar Rao as an
Executive Director to fill the vacancy created when Ms Usha Narayanan
demitted her office. Mr Rao will be in charge of the Investment
Management Department (mutual funds, foreign institutional investors
and custodians and Collective Investment Schemes) which were earlier
handled by S Ravindran, another Executive Director. Ravindran will now
Indian Market Structure Monthly Newsletter
assume responsibility of the corporate finance department vacated by Ms
Narayanan earlier.
SEBI has also undergone an internal reshuffle of roles and responsibilities
amongst the officers who were in the same role for more than 3 years.
This is done as a measure to avoid any wrong doings by any of the
internal staff by virtue of holding a position of authority for a long period.
http://articles.economictimes.indiatimes.com/2012-07-23/news/32804972_1_stockexchanges-and-depositories-collective-investment-scheme-sebi
12
— BSE 100 derivatives – BSE is launching derivatives based on its broad
based index BSE 100 to compete with the Nifty derivatives. BSE 100
has 99.4% correlation with both Nifty as well as MSCI India indices
and therefore is expected to offer the same dynamics at a much lower
cost to the traders.
BSE touched a record high of Rs 1000 crore in July, the market views this
as a result of the incentive scheme.
http://www.business-standard.com/india/news/bse-100-derivatives-to-takenifty-50/481332/
http://www.thehindubusinessline.com/markets/stock-markets/article3635878.
ece?homepage=true&ref=wl_home
http://www.indianexpress.com/news/bse-to-launch-cash-future-spread-to-deriskarbitrage/980862/
http://articles.economictimes.indiatimes.com/2012-07-04/news/32537016_1_
voluntary-retirement-regional-offices-usha-narayanan
http://www.thehindubusinessline.com/markets/stock-markets/article3696426.
ece?homepage=true
Venue Updates
NSE Nifty stocks attract record FII investments
Stock exchanges to levy charges for Algorithmic Trading
The two major stock exchanges NSE and BSE have announced that they
will be charging a levy between 1 paisa and 5 paise for each algorithmic
order or modification. The move is expected to curb speculative trading
and manipulation in the stock markets through the use of High Frequency
Trading where the traders seek to take advantage of thin spreads. Both
RBI and SEBI had earlier expressed apprehensions on the HFT techniques
and their impact on the markets.
http://www.business-standard.com/india/news/exchanges-step-in-to-curb-algospeculation/479178/
MCX-SX approval increases Indian competition
MCX-SX has been given approval to start operations in the equities,
derivatives (equities and interest rate F&O) and whole sale debt segments
and become the third full fledged nationalised stock exchange. The SEBI
approval comes with a condition that the two major promoters MCX and
Financial Technologies will reduce their holding including warrants to the
permissible level of 5% within 18 months.
The new bourse is planning to launch the currency derivatives first
followed by the equity trading platform by October this year, MCX-SX also
intends to launch both equity and interest rate derivatives. The enrolment
for members in the equities space is expected to commence very soon.
“We would go live with equity trading in a couple of months before
Diwali. But the decision will be taken in the soon-to-be-held board
meeting. We have the technology and infrastructure in place but have to
enroll members.” - Joseph Massey, MD and CEO of MCX-SX, said.
A number of stocks included in the NSE’s Nifty index have witnessed
their FII shareholding rise to the highest level during the past 20 quarters.
FIIs have invested around $10 billion (Rs.55,000 crore) as of 31st July and
may touch $17.14 billion by the year-end at the same pace.
http://www.livemint.com/2012/07/30221822/FII-holdings-in-Nifty-firms-at.html?atype=tp
Nifty futures trading on SGX declines; Nifty options off to a slow start
The trading activity for NSE’s Nifty futures on SGX experienced a decline
while the activity increased on NSE’s derivatives segment reversing the
trend of foreign institutions moving to the SGX platform in the wake of
taxation issues. The Open Interest on SGX for the month of July was just
5% higher than that of NSE compared to 47% in the previous month.
Meanwhile, the options contracts on NSE Nifty offered by SGX are
trading a daily average of about 6000 contracts.
http://www.business-standard.com/india/news/nifty-futures-trading-shifting-back-toindia-/481957/
http://www.business-standard.com/india/news/nifty-options-make-slow-startsgx/481760/
LSE picks up 5% stake in DSE
In a bid to tap the opportunity provided by emerging markets, the London
Stock Exchange has picked up a 5% stake in the currently dormant Delhi
Stock Exchange and aims to provide it with the fastest trading technology
through Millennium IT (a subsidiary of LSE) and revamp its platform.
http://business-standard.com/india/news/british-bourse-lse-buys-5-stake-in-delhistock-exchange/479423/
http://www.business-standard.com/india/news/mcx-sx-to-go-live-by-oct/480162/
http://articles.economictimes.indiatimes.com/2012-07-11/news/32633151_1_mcx-sxmcx-stock-exchange-mcx-sx-permission
http://in.reuters.com/article/2012/07/11/india-mcx-sebi-idINDEE86A02U20120711
BSE launches two new derivative products CFS (cash-future
spread) and BSE 100
BSE has introduced two new derivative products to be launched in the
first week of August. Both of these products will also be added to the
ongoing market making incentive scheme for BSE derivatives.
— Cash-Future Spread – This product is aimed to reduce the risk in
arbitrage between the cash and futures segments by allowing
investors to take positions in both cash and future segments for a
stock through a single trade. The product will be made available for
all stocks trading on the BSE F&O segment. The trade will have two
legs, one for each segment and will be settled separately by delivery
mechanism (T+2 for cash, T+3 for futures if open till expiry).
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Japanese Newsletter Issue 19
Fig 1: Equities Japanese market monthly ADT (lit & auction types)
30.00
10.00
The Securities and Exchange Surveillance Commission recommended
that administration action be taken against Nomura due to the following
findings:
5.00
0.00
— Problems related to the compliance system
12.00
Jul
Aug
Sep
Oct
Nov
Dec
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
Tokyo
19-July
Osaka
18-July
SBI Japannext
Instinet Japan
17-July
Sapporo
Nagoya
16-July
Kabu
Fukuoka
13-July
0.00
Chi-X Japan
12-July
3.00
Source: Thomson Reuters, 2012
Fig 3: Futures OSE NIKKE monthly ADT
14.00
2010
2011
2012
(USD bn)
12.00
10.00
8.00
6.00
— Listed companies without outside directors will be required to disclose
the reason why appointing an outside director would be inappropriate.
4.00
2.00
— Measures to encourage rights issues
The TSE’s President Atsushi Saito released a statement notifying the
market that the exchange will be reviewing their listing procedures
once the draft text is finalised. The TSE is in favour of listed companies
appointing outside, independent directors and will be encouraging
companies to consider transitioning to the new “Company with Audit
and Supervisory Committee’ structure.
Jun
9.00
6.00
— Periodically submit reports on the implementation status and the
results of examination
Updated drafting of the Companies Act was released on 1st August by
the Ministry of Justice as it was felt that ‘there is a need to establish
discipline in the rules and regulations of financial instruments exchanges
to the effect that listed companies shall strive to secure at least one
independent board member that is an outside director”. The draft act
provides for the following requirements:
May
11-July
(USD bn)
15.00
Draft outline of amendments to the Companies Act
Apr
18.00
The FSA action requires that Nomura:
— Periodically examine the effectiveness of the recurrence prevention
measures
Mar
Fig 2: Equities Daily Turnover per venue - July 2012
— Information sharing within the institutional equity sales department
— Ensure the implementation and integration of the recurrence
measures specified in the report on the internal investigations as part
of the internal control system in the company
Feb
09-July
— Aggressive attempts by sales personnel to obtain information from
internal analysts
Jan
Source: Thomson Reuters, 2012
06-July
— Provision of information across the ‘Chinese Wall’
2012
15.00
05-July
Administrative action recommended against Nomura
2011
20.00
04-July
9.78%
03-July
USD$14.71bn
Source: Thomson Reuters, 2012
2010
25.00
02-July
%loss/gain
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
10-July
Japanese Market Structure Update
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg, 2012
Fig 4: Futures Daily Turnover per venue - July 2012
8.00
OSE NIKKEI
7.00
SGX NIKKEI
Venue News
(USD bn)
6.00
5.00
4.00
Source: Bloomberg, 2012
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
0.00
05-July
1.00
04-July
On Monday 6th August, the TSE halted trading in derivatives trading
in the TOPIX futures and the JGB futures for 95 minutes. In a scenario
reminiscent of the previous outage in February, the back-up system
failed due to a fault in the switch that should automatically activate it.
03-July
2.00
02-July
3.00
TSE outage due to ‘system error’
Japanese Market Structure Monthly Newsletter
14
The market was relatively quiet when the breakdown was in effect with
no major data releases, however, share trading volumes fell as the ability
to conduct index arbitrage business and hedging was limited.
Sources:
The issue related to the Tdex+ system used for derivatives rather than
Arrowhead, the cash equity platform. Investors were able to continue
trading on the Osaka Securities Exchange but it has resulted in various
press sources questioning if the disruption will have an effect on the
merger bid.
www.wsj.com
www.marketwatch.com
www.tse.or.jp
www.yomiuri.co.uk
www.ft.com
www.bloomberg.com
www.nytimes.com
www.risk.net
Monthly trading data for TSE
Trading volume in the equities market remained consistent at just over ¥1
trillion although the TOPIX fell by 4.4%, the first fall in two months.
Equity Market (Including ToSTNeT)
(Volume: mil. Shares/mil. units, Value: 100mil yen)
Trading
Volumes
Trading
Value
Sources
Change
from last
month
Change
from month
last year
Daily
average
www.fsa.go.jp
1st Section
36,855
216,481
-24,063
-35,959
10,308
www.tse.or.jp
2nd Section 401
469
-36
-299
22
2,803
+703
-1,294
133
www.bloomberg.com
Mothers
191
www.wsj.com
ETF
112.6
1,222
-262
-278
58
REIT
1.0
2,627
+231
+820
125
www.reuters.com
(Including foreign stocks)
Derivative Market (Including ToSTNeT)
(Volume/Open Interest: Units)
Trading
Volumes
Open
Interest
at end
of month
Change
from last
month
Change
from month
last year
Daily
average
997,602
-1,307,771
+255,963
47,505
442,504
882,577
-1,259,769
+170,821
42,027
390,433
JGB-Futures
559,700
-398,384
+68,587
26,252
87,538
(10-year JGB
Futures)
559,249
-397,025
+68,137
26,631
87,319
Index
Options
11
-629
+11
Options on
JGB-Futures
146,729
-38,559
+7,633
6,987
22,826
Individual
Options
42,041
-10,377
+9,505
2,002
86,811
Index
Futures
(TOPIX
Futures)
2,049
ETF Market (Including ToSTNeT)
(Volume: thou. units, Value: mil. yen
Trading
Volumes
Trading
Value
Domestic
Stocks
96,761
TOPIX
Change
from last
Daily average
109,423
-26,187
5,211
65,001
48,944
-22,557
2,331
Nikkei 225
5,033
44,524
-4,504
2,120
Other
26,727
15,955
+873
760
REIT
2,649
2,615
+1,098
125
Foreign Stocks
4,788
1,852
-515
88
Foreign Bonds
7
212
+50
10
Commodities
8,417
8,160
-670
389
Total
112,622
122,263
-26,224
5,822
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
South Korea Newsletter Issue 19
South Korean Market Structure Update
Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types)
12.00
Venue Updates
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Fig 2: Equities Daily Turnover per venue - June 2012
7.00
Korea
6.00
KOSDAQ
5.00
4.00
3.00
2.00
Source: Thomson Reuters, 2012
Fig 3: Futures KFE KOSPI monthly ADT
60.00
2010
2011
2012
50.00
40.00
30.00
20.00
KRX release 2011 Factbook and a Listing Guide for Foreign
Companies
The Korea Stock Exchange published “KRX Fact Book 2011” on August
3rd 2012. The annual factbook includes multiple facts and figures on
the performance of Korean equity, bond and derivatives market in 2011.
Areas of interest include:
10.00
0.00
Jan
Feb
Source: Bloomberg, 2012
— Market Overview of KOSPI and Kosdaq, new developments for 2011
—A
summary of the trading rules, market operations, order types and limits
— Price ranges, volumes, growth rates and liquidity
—S
ector breakdowns of dividends, yields, trading volumes and value and
market capitalisation
—L
isting fees, annual dues and transaction costs (including taxes and
exchange fees)
—D
escription of the clearing and settlement system and procedures for
KRX
— Summary of listings and delistings.
Source: Thomson Reuters, 2012
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
0.00
10-July
1.00
09-July
These funds have been largely made up of entities affiliated with hedge
fund managers and prime brokers; the FSC is reported to be looking
to encourage investment from non-affiliated institutional investors and
high net worth individuals. The rules will also support the development
of prime brokers who will be able to service a wider range of institutions
such as pension funds.
0.00
Source: Thomson Reuters, 2012
06-July
The changes in regulation come after a six month trial period initiated
in December 2012 with 12 funds investing around US$130 million.
According to the Asian Investor, this figure had risen to US$625 by 25th
July, managed by 19 funds. Asian Investor also states that around 70%
of the funds are using long/short strategies, nine of which are domestic
and four global managed by 57 active hedge fund managers.
2.00
05-July
Similarly, equity capital requirements for hedge fund setup for brokers
will be eased; brokers with KRW 500 billion (US$440 million) equity
capital will also be qualified for setting up hedge funds which is eased
from the current minimum requirement of KRW 1 trillion. The new
measure will take effect starting November this year.
4.00
04-July
The Financial Services Commission (“FSC”) announced on 29th July
that it is looking to loosen regulations on hedge funds to enable asset
managers and brokers to more easily setup hedge funds. Under current
rules, asset managers with asset under management (“AUM”) of over
KRW 10 trillion (approximately US$8.8 billion) are eligible for the setup
and management of hedge funds but the new rule will cut the minimum
AUM requirement down to KRW 1 trillion (US$880 million).
6.00
03-July
Korea to loosen hedge fund regulation
2012
8.00
02-July
3.80%
(USD bn)
USD$5.52bn
Source: Thomson Reuters, 2012
2011
10.00
(USD bn)
%loss/gain
(USD bn)
Monthly ADT (July 2012)
Total (USD$)
South Korean Market Structure Monthly Newsletter
16
Also available is the investor breakdown. The below summary table
can be found on page 36 and shows that for 2011, individuals make up
approx 55% of the KOSPI market with around 18% coming from foreign
investment, 3% from the government and the remaining 24% coming
from institutionals.
Trading Value by Investor Group
Year
(KRW bil., %)(KRW bil., %)
Institutional Investors
Total
Trading
Value
Securities Cos.
Insurance Cos.
Sales
Sales
Purchase
Purchase
Asset Mgmt Cos.Private Equity Funds
Sales
Banks
Purchase Sales Purchase Sales Purchase
1,362,877
(100)
36,880
(2.7)
39,874
(2.9)
17,340
(1.3)
18,664 143,657 148,256
(1.4)
(10.5)
(10.9)
0
(0.0)
0
(0.0)
14,663
(1.1)
12,945
(1.0)
2008 1,287,165
(100)
35,928
(2.8)
46,073
(3.6)
21,188
(1.7)
25,661 156,978 154,713
(2.0)
(12.9)
(12.0)
8,655
(0.7)
9,237
(0.7)
10,866
(0.8)
11,606
(0.9)
2009 1,466,275
(100)
43,202
(3.0)
50,303
(3.4)
28,530
(2.0)
29,033 191,520 169,767 11,699 11,110
(2.0)
(13.1)
(11.6)
(0.8)
(0.8)
12,770
(0.9)
9,594
(0.7)
2010 1,410,562
(100)
62,898
(4.5)
63,918
(4.5)
38,798
(2.8)
39,292 131,640 112,950 22,068 20,015
(2.8)
(9.3)
(8.0)
(1.6)
(1.4)
15,680
(1.1)
14,238
(1.0)
2011 1,702,060
(100)
72,314
(4.3)
74,225
(4.4)
48,231
(2.8)
48,193 142,925 140,047 20,468 23,015
(2.8)
(8.4)
(8.2)
(1.2)
(1.4)
18,140
(1.1)
16,047
(0.9)
2007
Institutional Investors
Year Merchant & Mutual
Savings Banks
Sales
Purchase
Pension Funds
Government &
municipality
Sales
Sales
Purchase
Purchase
Individuals
Sales
Purchase
Foreigners
Sales
Purchase
2007
4,248
(0.3)
3,727
(0.3)
31,586
(2.3)
35,388
(2.6)
43,742
(3.2)
54,003
(4.0)
721,266
(52.9)
727,712
(53.4)
345,624
(25.4)
320,911
(23.5)
2008
2,771
(0.2)
2,818
(0.2)
31,522
(2.5)
41,059
(3.2)
36,837
(2.9)
45,331
(3.5)
636,106
(49.4)
638,940
(49.6)
343,898
(26.7)
31.294
(24.1)
2009
4,229
(0.3)
4,035
(0.3)
44,555
(3.0)
36,334
(2.5)
12,577
(0.9)
13,436
(0.9)
856,830
(58.4)
854,868
(58.3)
233,243
(15.9)
265,630
(18.1)
2010
4,580
(0.3)
4,048
(0.3)
37,392
(2.7)
46,401
(3.3)
22,040
(1.6)
21,725
(1.5)
772,747
(54.8)
767,364
(54.4)
273,757
(19.4)
295,330
(20.9)
2011
3,827
(0.2)
3,489
(0.2)
50,143
(3.0)
62,948
(3.7)
53,317
(3.1)
53,354
(3.1)
944,793
(55.5)
942,973
(55.4)
316,098
(18.6)
308,103
(18.1)
For full report (English):
http://eng.krx.co.kr/coreboard/BHPENG08004/view.jspx?bbsSeq=19794&secretYn=N
KRX also published an updated listing guide for foreign companies on
3rd July 2012. This guide details the procedure and requirements for
listing on KRX and other regulatory, accounting, and legal details.
For full report, click here (English):
http://eng.krx.co.kr/coreboard/BHPENG08004/view.jspx?bbsSeq=19793&secretYn=N
Korea’s ETF market expanded sharply
The Korea Stock Exchange stated on 27th July that Korea’s Exchange
Traded Fund (“ETF”) market has been growing rapidly. According to the
bourse, Korea along with Japan topped in terms of number of ETFs in
December last year (up 141% YoY) and in terms of AUM Korea ranked
4th with US$8.5 billion (up 64% YoY) last year.
KRX added that this rapid expansion is mainly due to a sharp increase in
derivative-type ETFs which accounted for 75% all ETF trades last year.
Sources
www.krx.co.kr
www.koreatimes.co.kr
www.yonhapnews.co.kr
www.asianinvestor.net
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
Australian Newsletter Issue 19
2010
4.00
3.00
1.00
ASX appears to broaden definition of ‘dark’ to include futures
expiries
0.00
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Normal
CentrePoint
Jul 26: All Individual Equity
Derivatives Expiration
Crossing
60.00
ETF Special Trades
Options
(USD bn)
50.00
Other
40.00
Special Crossing
Jul 19: All Equity Index
Derivatives Expiration
30.00
Auction-Close
Auction-Open
20.00
Unknown
10.00
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
04-July
03-July
02-July
0.00
Source: Thomson Reuters, 2012
Fig 3: Equities Daily % Order Type - Jun 2012
120.00
ASIC is seeking to overhaul so called ‘’creep’’ provisions where corporate
raiders can ramp up their shareholdings by 3 percentage points every six
months once they surpass 19.9% without paying a premium for a formal
takeover bid.
100.00
% Dark
% Lit
% Real-Time
Off-Exchange
OTC
80.00
%
60.00
40.00
ASIC has written to the Treasury requesting that ‘creep’ provisions need
to be reviewed by the government , with a view to reducing gradual
ownership to 1 percentage point per six months, rather than the current 3
percentage points.
31-July
30-July
29-July
28-July
27-July
26-July
25-July
24-July
23-July
22-July
21-July
20-July
19-July
18-July
17-July
16-July
15-July
13-July
14-July
12-July
11-July
10-July
9-July
8-July
7-July
6-July
5-July
2-July
0.00
4-July
20.00
Source: Thomson Reuters, 2012
Fig 4: Equities Spreads (bps) - July 2012
43
S&P ASX
All Ords (AUD)
38
Spreads (bps)
33
28
S&P ASX300
(AUD)
23
18
S&P ASX20
(AUD)
13
8
Source: Thomson Reuters, 2012
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
3
02-July
Many have interpreted Mr. Medcraft’s comments as a warning to
James Packer and fellow billionaire Gina Rinehart, as the current
corporate manoeuvres by Fairfax Media and Echo Entertainment
has caused consternation where the respective chairmen have been
subjected to public criticism. Mr. Medcraft commented that “where
there are means other than legal or other means used to take control of
a board, then I believe that needs to be looked at in terms of the spirit
of the takeover laws.”
Mar
70.00
ASIC seeks end to ‘takeovers by stealth’
“I think the current creep provisions are an anachronism. It is basically
allowing takeover by stealth which I think is inconsistent with the takeover
law in terms of making when there is a change of control and there is a
premium to be paid that all parties can share in.”
Feb
Fig 2: Equities Daily Turnover per venue - July 2012
For the full report click here:
ASIC’s chairman Greg Medcraft told AM that the legal but destabilizing
use of ‘creep’ tactics by corporate raiders needed to be overhauled:
Jan
Source: Thomson Reuters, 2012
There have been a number of inaccurate press reports that have
since taken the figure as indicating the volumes crossed in dark pools
demonstrating the confusion that can be caused by unclear data sourcing.
http://www.asxgroup.com.au/media/PDFs/asx-submission-to-asic-cp-179august-2012.pdf
2012
2.00
Source: Thomson Reuters, 2012
The Australian exchange has submitted a public response to the ASIC CP
179 which makes a number of strong statements against competition
and dark trading. The exchange submits that between 14% and 43% of
trades are now executed as ‘dark execution [that] takes away liquidity
from the lit market’. From the data provided, it would appear that these
numbers include trades that resulted from the futures expiry date on 21st
June. However, investors are not able to interact with expiry trades as they
are the result of a right previously paid for through the derivative contract
and not for the open market. Expiry trades are not executed in automated
crossing systems commonly referred to as dark pools.
2011
5.00
04-July
%loss/gain
11.69%
12.22%
6.07%
16.16%
3-July
Total (AUD$)
AUD$3.24bn
AUD$3.07bn
AUD$0.13bn
AUD$0.04bn
(lit, auction & non-displayed order types)
6.00
03-July
Monthly ADT (July 2012)
Total market ADT
Lit ADT
Dark ADT
OTC ADT
Fig 1: Equities Australian market monthly ADT
(USD bn)
Australian Market Structure Update
Australian Market Structure Monthly Newsletter
In an interview with The Australian, Mr. Packer questioned ASIC’s reform
proposals and said of Mr. Medcraft:“I think the guy’s job is to implement
law, not make law. When was he elected to make law? Who elected him
to make law?”
18
Fig 5: Equities Volatility - June 2012
20
18
16
ASX faces new clearing challenge
S&P ASX
All Ords (AUD)
10
S&P ASX300
(AUD)
8
6
S&P ASX20
(AUD)
4
2
London based LCH Clearnet has applied to run clearing facilities for derivatives, cash
and shares, which if successful would end ASX’s monopoly over the clearing of
securities trades.
Source: Thomson Reuters, 2012
LCH Clearnet has made at least three applications to relevant regulatory bodies, including
the Reserve Bank and ASIC. The company is waiting for a response from key regulators.
ASX chief executive Elmer Funke Kupper, has said that ASX would “compete strongly”
and “adapt” if more newcomers entered the local market. Chi-X chief executive Peter
Fowler said he supported competition in clearing and argued that it would make the
market more efficient and transparent.
Fig 6: Futures SFE-ASX SPI 200 monthly ADT
8.00
2010
7.00
2011
2012
6.00
(USD bn)
Representatives of the Council of Financial Regulators, which include the Reserve Bank of
Australia, ASIC, the Australian Competition and Consumer Commission and Treasury, met
with market participants last week to discuss the prospect of allowing rival companies to
settle trades. During the talks with securities exchange representatives and stockbrokers ,
it was resolved that there was scope to open up the local market to providers that can clear
cash equity trades which have been executed on the ASX or Chi-X.
5.00
4.00
3.00
2.00
1.00
Chi-X allow participants to remove instruction for trade to be sent
to clearing house
As of 2nd July, Chi-X has enabled FIX tag 8177 RemoveCrossingFromClearing to allow
brokers to indicate if they do not wish the trade to be sent to the clearing house. Tag 76
ExecBroker will also need to show the same value as it indicates that the same broker is
on both the buy and the sell side of the trade.
Brokers will still need to ensure that they have appropriate arrangements in place for the
settlement and processing of the transaction.
For the full notice click here:
http://www.chi-x.com/resources/au/file/Market%20Operations%20Notice%20001112.pdf
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Source: Bloomberg, 2012
Sources
www.asic.gov.au
www.asx.com.au
www.foxbusiness.com
www.theaustralian.com.au
www.afr.com
www.theaustralian.com.au
ASX plans data centre with Singapore Exchange
www.smh.com.au
In a statement ASX said that it and Singapore Exchange Ltd will host hubs belonging to
each other in their own data centres from September, with the aim of increasing the flow
of future activity between the two exchanges.
Around 6% of futures and options volume on the ASX 24 market is generated from the
Australian exchange’s global hub network across the US, UK and Hong Kong as well as
Singapore, said ASX’s General Manager of Trade Execution Information Services David
Raper.
Source: Thomson Reuters, 2012
In an interview Mr Raper said :
“Our Chief Executive has been out there saying it’s much more likely that we’ll see this
kind of cooperation between exchanges. The real value for us and SGX is seeing how we
work together on this. Assuming this model works, we would look to extend this to other
centers.”
Changes to Centre Point Crossings
Following consultation with ASIC, the hold period for the price at which Centre Point
Priority has been lowered. Crossings undertaken from 16th July 2012 now only need to
apply a hold period of 1 second.
Since the inception of Centre Point Priority Crossings in June 2010, a hold period of 30
seconds has applied the mid-point price to facilitate a participant determining whether it
wishes to cross the Centre Point orders at that price.
Source: Thomson Reuters, 2012
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Sep
Oct
Nov
Dec
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
04-July
02-July
0
03-July
Venue News
(USD bn)
14
12
Deutsche Bank
Equities
Global Market Structure
ASEAN Newsletter Issue 19
ASEAN Market Structure Update
Fig 1: Equities Singapore market monthly ADT
(lit, auction & non-displayed order types)
1.60
Monthly ADT (July 2012)
USD$0.73bn
%loss/gain
1.40
21.41%
1.20
Source: Thomson Reuters, 2012
SEC Philippines consults on draft rules for ETF listing
The Securities and Exchange Commission, Philippines has released
a public consultation on Rules and Regulations for Exchange Traded
Funds (“ETF”) that will allow listing of ETFs on the local bourse.
The draft includes provisions that classify ETFs as a new investment
product allowing issuers to hurdle old rules that only recognised
more traditional financial instruments.
The draft rules can be found at
(USD bn)
Total (USD$)
2010
2011
2012
1.00
0.80
0.60
0.40
0.20
0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Thomson Reuters, 2012
Fig 2: Equities Daily % order type - July 2012
http://www.sec.gov.ph/notices/notices/RPD_Draft_Rules_on_ETF%20-%20July%20
4_2012%20Version%206.pdf
120
% Lit
% Real-time on-exchange
40
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
0
05-July
20
04-July
“The Finance Ministry has issued a ministerial regulation on capitalgains-tax exemption for those who sell shares listed in Asean stock
markets via the Thai bourse.” said Vorapol Socatiyanurak, General
Secretary of the Securities and Exchange Commission.
60
03-July
In a bid to promote the upcoming ASEAN link and facilitate the joint
initiative, an exemption from capital gains tax has been announced
for traders (both domestic and foreign) who sell stocks listed in the
ASEAN stock markets through the Stock Exchange of Thailand.
80
02-July
Thailand waives off capital gains tax for ASEAN securities
(USD bn)
100
Source: Thomson Reuters, 2012
Fig 3: Futures SGX MSCI Singapore monthly ADT
Link-up of SGX and Bursa Malaysia delayed
An exact time frame for the final go-live for the link is not yet available.
Indonesia looks to reduce IPO approval time amid resilient
primary markets
Bapepam-LK, the Indonesian regulator for the financial sector is
looking to speed up the time taken for the evaluation of companies
that want to raise public funds. Currently it takes upto 45 working days
to approve an IPO application and the regulator is planning to cut this
short by at least 10 days to 35 working days.
“If there are no obstacles and all requirements are fulfilled, then in
the future, we could clear the evaluation process faster.” – said Anis
Baridwan, head of corporate finance bureau at Bapepam-LK.
2010
2011
2012
1.00
(USD bn)
The linkup between the Singapore Exchange (SGX) and Bursa Malaysia
as the first phase of ASEAN trading link implementation has been
delayed according to a press report. The link was scheduled to go
live by end of July this year. The exchanges are reported to be ready
technologically but are finalising the operational aspects before the link
is made operational.
1.20
0.80
0.60
0.40
0.20
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Bloomberg, 2012
Indonesian primary markets have been doing well even amid the global
financial crisis with the following seven firms launching their IPOs in July:
— Bank Pembangunan Daerah Jawa Timur Tbk
— Gading Development Tbk
— Tri Banyan Tirta Tbk
— Global Teleshop Tbk
— MNC Sky Vision Tbk
— Toba Bara Sejahtra Tbk
— Kobexindo Tractors Tbk
Source: Thomson Reuters, 2012
ASEAN Market Structure Monthly Newsletter
Venue News
SGX strengthens risk management framework for derivatives
Following up on the public consultation in Sep 2011, the Singapore
Exchange has strengthened its default management framework to protect
its derivatives market against systemically destabilising events, including
the possibility of multiple member defaults. Highlights include:
— Establishing the Clearing Member’s liabilities in circumstances of
multiple defaults (i.e. where several defaults occur in quick succession)
if the Clearing Member resigns.
— Allowing SGX-Derivatives Clearing (“SGX-DC”) to apply the Clearing
Fund continually to meet the losses arising from all defaults which
occur within a fixed period of 90 days.
— Clarifications and refinements to SGX-DC’s powers in managing a
default, including clarifying SGX-DC’s authority to transfer and manage
customer positions and margins from the defaulted Clearing Member
to a non-defaulting Clearing Member.
The enhanced rules will be effective 7th August.
SGX and ASX partner to enhance market connectivity; SGX
commences Nifty options trading
In a bid to enhance customer connectivity to international markets, the
Australian Stock Exchange and Singapore Exchange have announced
a partnership to host each other’s trading hubs. SGX will host an ASX
hub at its co-location centre at Singapore by Sep giving customers
direct connectivity to the ASX 24 futures market, while an SGX hub will
be hosted by ASX at the ASX Australian Liquidity Centre, Sydney. The
partnership will attract more global participants to the Singapore market
through a commitment to better connectivity, allowing SGX customers to
easily access international markets.
SGX also started trading in the SGX S&P CNX Nifty Options which
is based on the benchmark Indian stock index and aims to enhance
offshore investors’ access to the Indian economy.
SGX and LSE sign cross trading deal; SGX denies merger talks with
LSE
The Singapore Exchange has inked an agreement with the London Stock
Exchange to allow the top stocks from both venues to be available on
their respective platforms for local investors. The top 36 stocks on SGX
and all stocks of FTSE 100 index will be made available for cross trading
on the international boards of both exchanges. Trading hours for the most
actively traded stocks in both markets will be extended to about 15 hours
a day. The relevant SGX securities will be quoted on LSE by early next
quarter while the LSE securities will be quoted on SGX by the first half of
next year.
20
benefit our shareholders and the company. Hopefully we can do more
between London and SGX, like I can see us doing more with NYSE Euronext,
and Eurex and Nasdaq. SGX is more focused on products and services and
less on the M&A side.” - Mr Magnus Bocker, CEO of SGX, said.
SGX announces readiness for end-to-end renminbi securities
trading
The Singapore Exchange has announced that it has all systems and
processes in place to list, quote, trade, clear and settle securities
denominated in the Chinese currency in a bid to reinforce its eligibility as
an offshore renminbi trading hub.
“SGX, as the Asian gateway, is committed to being the exchange of
choice for issuers with RMB fundraising needs and for investors who
are keen to participate in the China growth story . The listing and trading
of RMB securities on SGX will also extend Singapore’s position as an
offshore RMB centre.” said SGX CEO Magnus Bocker.
SGX raises eligibility criteria for mainboard listings to step up
market transformation
The Singapore Exchange has announced an enhanced set of eligibility
criteria for the companies seeking to list on the SGX’s mainboard. The
new criteria will come into effect on 10th August and extend market
transformation to the quality of the primary (IPO) market, making it
attractive for larger companies seeking to list. Ongoing deals in the
existing pipeline will have a nine-month window to list under the old
rules.
According to the new criteria, the companies looking to list on SGX
mainboard must:
— Have a market capitalisation at IPO of not less than S$150 million if
they are profitable in the last financial year and have an operating track
record of at least three years.
— Have a market capitalisation at IPO of not less than S$300 million if
they only have operating revenue in the latest completed financial year.
— Have minimum consolidated pre-tax profit of at least S$30 million for
the latest financial year and have operating track record of at least
three years.
— Issue shares with a minimum price of SG$ 0.5.
SGX is also looking to increase the proportion of IPO tranches allocated to
retail investors, particularly for listings which draw high retail subscription.
SGX proposes margins for stock trading
“We are excited to be partnering with LSE to offer customers in our
respective markets a platform for investing in some of the world’s largest
companies.” - Mr Magnus Bocker, CEO of SGX, said.
In a bid to strengthen the financial system, SGX has proposed to collect
margins on equities trades cleared through its system. Margins will be
imposed on members of its central depository (“CDP”) clearing house
and will vary depending on the level of risk their portfolio poses to the
clearing system in the event of a default. The proposed rules will also
apply to other securities including structured warrants, real estate
investment trusts and exchange traded funds.
“As two of the world’s most international stock exchanges, we are
committed to bringing global capital and investors to London, as well as
raising the profile of companies listed on our markets.” – Mr Xavier Rolet,
CEO of LSE Group, said.
The rules are expected to take effect in January 2013 and could raise
overall trading costs, but will align SGX’s practices with new international
standards proposed by the International Organization of Securities
Commissions.
SGX has announced that it was not involved in any discussions with LSE
on a possible merger between the two exchanges after there were reports
that the two were mulling a US$11 billion merger.
Comments close on 21st August, for the full text see here:
“SGX has not engaged in talks with the LSE on a potential merger.
However, we are open to collaborations and partnerships which may
http://www.sgx.com/wps/wcm/connect/314dbe004c29b67cad5dff976e7f
295d/Consultation+Paper_Securities+Margining+%2830+July+2012%29.
pdf?MOD=AJPERES
ASEAN Market Structure Monthly Newsletter
21
SET announces operational masterplan; selects KRX to enhance
clearing and settlement systems
— must have an authorized capital stock of P 100 million, with at least
25% subscribed and fully paid
Stock Exchange of Thailand’s 5 year Operations Master Plan (advised by
Oliver Wyman) has been introduced in order to strengthen its operations
covering trading operations, depository, registrar, and clearing and
settlement services and will be in continuation to the IT Masterplan
released earlier.
— must have a cumulative pre-tax profit of at least P 15 million, excluding
non-recurring and extraordinary income or loss in the last three fiscal
years preceding the application for listing
As per the IT masterplan, SET has chosen the Korean Exchange to help
improve the clearing and settlement system for equities, derivatives,
and bonds traded in Thai capital markets to boost SET’s capacities to be
comparable to global leading clearing houses.
— cannot change its primary business purpose for five years from listing
“These two key developments are for increasing SET’s competitiveness,
creating business opportunities for members, and boosting investment
potential, as well as meeting demands of investors and market
participants. These improvements reinforce our great efforts to
continuously match the right financial opportunities for investors and all
other market participants.” said SET President Charamporn Jotikasthira.
SET adjusts trading rules
The Stock Exchange of Thailand has adjusted the trading rules governing
the calculation of ceiling and floor price, opening and closing prices
and has increased the categories of market orders. Following are the
adjustments applied:
— On their first trading day, the ceilings and floors of IPO prices and
warrants, derivative warrants (DWs), and transferable subscription
rights (TSRs) have to move in symmetric price bands
— For equities and investment units, ceilings will be set at 300% of IPO
prices, while ceilings of warrants, DWs, and TSRs must be no more
than double the previous closing price of their underlying security
multiplied by the exercise ratio. Floors of all mentioned securities must
be no lower than Bt0.01
— The opening and closing prices will be those which yield the highest
volume of trading
— New categories of market orders will be made available such as
special market orders, market orders, and market to limit orders
— The bid amount can be reduced before the trading system matches
the bid with an offer without losing the bid’s place in the queue. This
amendment will not apply to increasing the bid amount though.
SET has also expanded its Third Party Clearing (TPC) facility by allowing
the give-up/take-up arrangement, enabling non-clearing members to
outsource clearing and settlement to more than one clearing member.
This will help reduce the risk of clearing and settlement by distributing
transactions to more than one party.
Philippine Stock Exchange reaches an all-time high; proposes a
new listing board
The Philippine Stock Exchange index (PSEi) closed at a new all-time
high of 5,369.98 on 5th July after a sovereign credit rating upgrade for
the country was announced by S&P. The net foreign buying in the local
markets in 1H 2012 have crossed P 71 billion which is 380% higher than
the net inflows in 1H 2011 (P 14.75 billion)
— must demonstrate stable financial condition and prospects for growth
by submitting among others, a five-year business plan
— existing shareholders cannot dispose of their securities for a period of
2 years after listing
Bursa Malaysia touches record high, enhances its trading system
and introduces central matching
Buoyed by a growing economy and capital markets, Bursa Malaysia
recorded its all-time high of 1,635.96 on 16th July on the back of investor
interest in selected finance and utility bluechips.
Bursa has released its enhanced trading system to improve the market’s
framework and efficiency and allow market participants to execute a
greater variety of trading and risk management strategies through the
introduction of new order and validity types. Traders will now be able to
use Market to Limit order, Fill and Kill, and minimum quantity as new
order and validity parameters.
Bursa Malaysia has also introduced the enhanced Central Matching
Facility, an automated settlement system offering end-to-end electronic
matching of trade and settlement details between Trading Clearing
Participants (stock broking companies) and Non-Trading Clearing
Participants (custodian banks).
The Bursa is reported to be mulling to increase the tranche allocated
to the retail participants in new public offers in a bid to increase retail
participation in the local markets. This comes in the wake of successful
listings of two of the world’s largest IPOs (Felda and IHH) and a strong
pipeline of IPOs to come during the rest of the year.
Vietnam raises capital requirements for listing
Vietnam stock exchanges have raised the minimum capital requirement
for companies looking to list on any of the two bourses. For Ho Chi
Minh City Stock Exchange, the minimum registered capital requirement
is raised to VND120 billion (from VND80 billion) while for Hanoi Stock
Exchange it has been raised to VND30 billion (from VND10 billion).
Sources
www.channelnewsasia.com
www.en.acnnewswire.com
www.sgx.com
www.ft.com
www.mas.org
www.biz.thestar.com.my
www.reuters.com
www.bworldonline.com
www.4-traders.com
www.nationmultimedia.com
www.bangkokpost.com
www.philstar.com
www.todayonline.com
www.waterstechnology.com
www.online.wsj.com
www.btimes.com
www.thejakartagloble.com
www.finextra.com
“The market’s run in the first half has been nothing short of historic,
and there’s a good chance that we will be able to extend this forward
momentum as we anticipate better first-half earnings from our listed
firms.” - PSE president Hans Sicat said.
The PSE has proposed to create a new listing board to replace the
existing second and SME boards which were suspended from listing any
new companies earlier. The new board is also aimed to assist small cap
companies to raise public funds. PSE has however proposed stricter rules
for the new board to adequately protect investor interests. The companies
applying for listing
Contact
Email: Tel: global.marketstructure@list.db.com
+852 2203 5710
+44 207 547 5552
+1 212 250 4170
Deutsche Bank
Equities
Global Market Structure
APAC Quant Analysis Factsheet - July 2012
Below is a selection of quantitative metrics, which provides additional analysis of the markets and liquidity during July 2012.
For further information, please contact:
Global Market Structure:
email: global.marketstructure@db.com
tel: +44 207 547 4390
Quantitative Analysis:
email: eq_quant_trading@list.db.com
tel: +44 207 545 3129
Liquidity
The chart below shows the daily index primary spreads on APAC indices during July 2012:
33.0
Spread(bps)
Spread(bps)
33.0
28.0
MSCI Asia Pacific Ex JP
28.0
23.0
MSCI Asia200
Pacific
Ex JP
S&P/ASX
Index
23.0
18.0
S&P/ASX
200
Index Index
Hang
Seng
Composite
Hang Seng
Composite
Index
Korea
SE Kospi
200 Index
18.0
13.0
Korea SE
KospiIndex
200 Index
Taiwan
TAIEX
13.0
8.0
Taiwan
TAIEX
Index
FTSE
Straits
Time
Index
8.0
3.0
31-July
31-July
30-July
30-July
27-July
27-July
26-July
26-July
25-July
25-July
24-July
24-July
23-July
23-July
20-July
20-July
19-July
19-July
18-July
18-July
17-July
17-July
16-July
16-July
13-July
13-July
12-July
12-July
11-July
11-July
10-July
10-July
09-July
09-July
06-July
06-July
05-July
05-July
04-July
04-July
03-July
03-July
02-July
02-July
3.0
FTSES&P
Straits
Time
Index
NSE
CNX
Nifty
NSE S&P CNX Nifty
Sources:Deutsche Bank AG estimates and calculations
Historical Volatility
The chart below shows primary volatility of APAC indices during July 2012:
28.0
28.0
26.0
Volatility
Volatility
26.0
24.0
24.0
22.0
MSCI Asia Pacific Ex JP
22.0
20.0
MSCI Asia200
Pacific
Ex JP
S&P/ASX
Index
20.0
18.0
S&P/ASX
200
Index Index
Hang
Seng
Composite
18.0
16.0
Hang Seng
Composite
Index
Korea
SE Kospi
200 Index
16.0
14.0
Korea SE
KospiIndex
200 Index
Taiwan
TAIEX
14.0
12.0
Taiwan
TAIEX
Index
FTSE
Straits
Time
Index
12.0
10.0
FTSES&P
Straits
Time
Index
NSE
CNX
Nifty
n
70.0%
70.0%
31-July
31-July
30-July
30-July
27-July
27-July
26-July
26-July
25-July
25-July
24-July
24-July
23-July
23-July
20-July
20-July
19-July
19-July
18-July
18-July
17-July
17-July
16-July
16-July
13-July
13-July
12-July
12-July
11-July
11-July
Sources:Deutsche Bank AG estimates and calculations
10-July
10-July
09-July
09-July
06-July
06-July
05-July
05-July
04-July
04-July
03-July
03-July
8.0
02-July
02-July
10.0
8.0
NSE S&P CNX Nifty
12.0
FTSE Straits Time Index
10.0
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
NSE S&P CNX Nifty
12-July
11-July
10-July
09-July
06-July
05-July
04-July
03-July
02-July
Quant8.0Factsheet Monthly Newsletter
Intra-Index Correlation
The chart below shows the correlation of movement within each index, calculated using the index and index constituents volatilities and weights:
60.0%
MSCI Asia Pacific Ex JP
50.0%
S&P/ASX 200 Index
40.0%
Hang Seng Composite Index
30.0%
Korea SE Kospi 200 Index
20.0%
Taiwan TAIEX Index
10.0%
FTSE Straits Time Index
31-July
30-July
27-July
26-July
25-July
24-July
23-July
20-July
19-July
18-July
17-July
16-July
13-July
12-July
11-July
10-July
09-July
06-July
05-July
04-July
NSE S&P CNX Nifty
03-July
10.0%
02-July
Intra-Index Correlation
70.0%
Sources:Deutsche Bank AG estimates and calculations
Sector Correlation Matrix
The matrix below shows the % correlation of movement between two sectors during the previous month:
Banks
Basic Res.
Chemicals
Constr. & Mat.
Financial Serv.
Food & Bev.
Ind. Gds & Serv.
Media
Oil & Gas
Pers. Goods
Real Estate
Retail
Technology
Telecoms
Travel & Leis.
Utilities
Utilities
<25%
Travel &
Leis.
Telecoms
Tech.
25-60%
Retail
Real
Estate
Pers.
Goods
60-80%
Oil & Gas
Media
Food &
Bev.
Financial
Serv.
Const. &
Mat.
Chemical
Basic
Res.
Banks
Auto &
Parts
Auto. & Parts
Ind. Gds
& Serv.
80-100%
1M Historical Correlations
100.0% 75.1% 83.0% 72.7% 89.7% 73.6% 75.4% 81.1% 82.5% 81.0% 77.2% 63.6% 72.6% 84.6% 72.9% 67.7% 70.3%
75.1% ##### 83.7% 87.8% 84.6% 88.0% 84.8% 85.4% 85.2% 89.1% 86.6% 77.1% 79.2% 86.8% 85.4% 78.7% 87.3%
83.0% 83.7% ##### 83.1% 94.5% 86.0% 81.9% 90.1% 87.0% 88.5% 86.9% 82.3% 80.4% 85.9% 80.7% 71.0% 82.4%
72.7% 87.8% 83.1% ##### 80.6% 84.1% 82.0% 85.4% 83.6% 88.4% 80.4% 78.4% 84.1% 81.7% 75.1% 73.0% 76.0%
89.7% 84.6% 94.5% 80.6% ##### 84.8% 81.9% 90.5% 87.6% 89.6% 87.4% 79.4% 79.9% 90.3% 83.6% 73.7% 79.7%
73.6% 88.0% 86.0% 84.1% 84.8% ##### 89.1% 85.0% 89.2% 86.5% 87.2% 87.5% 76.7% 84.6% 81.3% 81.7% 85.1%
75.4% 84.8% 81.9% 82.0% 81.9% 89.1% ##### 84.0% 83.4% 84.3% 83.1% 82.8% 82.2% 82.5% 81.5% 85.7% 75.5%
81.1% 85.4% 90.1% 85.4% 90.5% 85.0% 84.0% ##### 91.6% 84.8% 81.4% 86.7% 90.3% 84.5% 82.6% 77.8% 82.9%
82.5% 85.2% 87.0% 83.6% 87.6% 89.2% 83.4% 91.6% ##### 85.3% 84.4% 83.3% 82.0% 90.1% 76.9% 83.3% 80.8%
81.0% 89.1% 88.5% 88.4% 89.6% 86.5% 84.3% 84.8% 85.3% ##### 86.3% 79.2% 77.3% 84.3% 82.5% 75.6% 77.4%
77.2% 86.6% 86.9% 80.4% 87.4% 87.2% 83.1% 81.4% 84.4% 86.3% ##### 81.5% 75.9% 88.3% 82.7% 80.7% 86.4%
63.6% 77.1% 82.3% 78.4% 79.4% 87.5% 82.8% 86.7% 83.3% 79.2% 81.5% ##### 75.7% 74.1% 81.2% 76.3% 82.0%
72.6% 79.2% 80.4% 84.1% 79.9% 76.7% 82.2% 90.3% 82.0% 77.3% 75.9% 75.7% ##### 78.8% 75.2% 72.9% 72.0%
84.6% 86.8% 85.9% 81.7% 90.3% 84.6% 82.5% 84.5% 90.1% 84.3% 88.3% 74.1% 78.8% ##### 78.3% 76.3% 78.7%
72.9% 85.4% 80.7% 75.1% 83.6% 81.3% 81.5% 82.6% 76.9% 82.5% 82.7% 81.2% 75.2% 78.3% ##### 74.4% 81.6%
67.7% 78.7% 71.0% 73.0% 73.7% 81.7% 85.7% 77.8% 83.3% 75.6% 80.7% 76.3% 72.9% 76.3% 74.4% ##### 76.5%
70.3% 87.3% 82.4% 76.0% 79.7% 85.1% 75.5% 82.9% 80.8% 77.4% 86.4% 82.0% 72.0% 78.7% 81.6% 76.5% #####
Sources:Deutsche Bank AG estimates and calculations
23
24
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Bank AG and/or its affiliates (“DB”). Without limitation, this document does not constitute an offer, an invitation to offer or a
recommendation to enter into any transaction. When making an investment decision, you should rely solely on any specific final
documentation relating to a transaction and not the summary contained herein. DB is not acting as your legal, financial, tax or
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