Asia Pacific Newsletter - Deutsche Bankcbs.db.com/new/pdf/GMS_news_APAC_Iss24.pdf · 2016-03-31 · Also, on 3rd December the first RMB repo transaction was effected. Further intervention

Global Market StructureAsia Pacific Newsletter

Contact:

Deutsche BankEquities

Issue 24, 2012Welcome to the APAC Market Structure Newsletter containing the news relating to market microstructure,exchange updates and regulatory developments.

Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170

Hong Kong ................................................Page 2HKEx/LME transaction completes

SFC release conclusions on regulation of IPO sposors

China ..........................................................Page 4Multiple amends to QFII regulation Exchanges set new delisting rules

Taiwan ........................................................Page 7Greater flexibility for inbound investmentFSC plan to allow day trading

India ...........................................................Page 9Pre trade controls definedGAAR deferred to 2016

Japan..........................................................Page 12Increased tax on dividend and interest income introduced Japan Exchange Group commences trading as single venue

South Korea ...............................................Page 15Delays in Basel III implementation

Hedge fund industry grows sevenfold

Australia .....................................................Page 17Treasury consults on license for trading platforms, revisits ASIC cost recovery model

FSC release buy side evaluation of HFT and Dark Pools

ASEAN .......................................................Page 20Further consultation on OTC derivative landscapeSGX provides access to Eurex

Quant Fact Sheet .......................................Page 23


Global Market Structure Hong Kong Newsletter Issue 24

SFC release consultation conclusions on the Regulation of IPO Sponsors

In order to address concerns around sponsor liability and the quality of prospectus information, the SFC has been gathering the views of the market and on 12th December, published the results. The SFC will introduce criminal liability for sponsors.

Although some respondees had concerns, the regulator does not at this point think there is a risk that underwriting, book running and pricing will be decoupled from sponsorship. While these functions are kept together it is felt that the current level of market integrity will be maintained and so does not consider it necessary to change the obligations for underwriters.

The proposals had received much support from the buy side with a range of responses from other market participants. Provisions are to become effective as of 1st October 2013.

For a full copy of the paper click here:

http://www.sfc.hk/edistributionWeb/gateway/EN/consultation/conclusion?refNo=12CP1

HKMA considers charging for Trade Repository reports

In line with the global commitments relating to the mitigation of risk when trading OTC derivatives, the Hong Kong trade repository is due to commence operations in Q2 of 2013. The reporting of OTC derivative transactions will enable regulators to assess systemic risk and will be mandatory.

The HKMA further announced in September 2012 that they would offer a trade matching and confirmation service through linking the repository technology to the HKEx’s CCP for clearing. This will be a service that market participants may use on a voluntary basis. The question now is whether the HKMA will be able to recover the operating costs for the platform given the combination of mandatory legal obligations and voluntary activities.

“On the reporting service, the HKMA has not yet decided whether to charge and if so, the level of charges,” says Esmond Lee, Executive Director, Financial Infrastructure, at the HKMA. “It is the intention of the HKMA to charge users of the matching and confirmation service, but the exact level of charge is still being considered by the HKMA. The HKMA does not intend to levy any charges before the mandatory clearing requirement commences”.

Further discussions with the industry are expected once the legislation is clear. The levels of overseas charging practices for trade repositories will be noted.

Second London/Hong Kong RMB Forum held

On 4th December, members of the RMB Forum met in London to consider growth in the RMB market. Topics under review included further developing liquidity, broadening the product range and the clearing and settlement infrastructure.

All Forum banks are now quoting RMB against GBP and EUR. Daily turnover in Hong Kong’s RMB Real Time Gross Settlement system has reached RMB 250 billion, an increase that has been cited by some as due to the extension in trading hours. The group is considering trading outside standard RMB hours.

Also, on 3rd December the first RMB repo transaction was effected.

Further intervention in currency markets

The HKMA stepped into the currency markets again on 21st December bringing the total value injected into the market since 21st October to HK$13.831 billion.

The Exchange Fund assets reached HK$2.64 trillion at the end of Novemebr 2012, up HK$35.9 billion from the previous month (HK$20.7 billion in foreign currency and HK$15.2 billion in Hong Kong dollar). The purpose of this fund as set out in the Exchange Fund Ordinance is to either directly or indirectly affect the exchange value of the currency of Hong Kong and to maintain the stability and integrity of Hong Kong’s monetary and financial systems.

Hong Kong Market Structure Update

Total (USD$) %loss/gain

Monthly ADT (Dec 2012) USD$6.60bn 21.87% Source: Thomson Reuters, 2012

Source: Thomson Reuters, 2012

Source: Bloomberg, 2012



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Fig 1: Equities Hong Kong market monthly ADT (lit, auction & non-displayed order types)

Fig 2: Futures HKFE HSI monthly ADT

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Hong Kong Market Structure Monthly Newsletter 3

HKMA to offer additional HK$21 million of Exchange Fund Bills

In order to meet demand, the HKMA is releasing the additional supply of short-dated Exchange Fund paper to helps banks with their liquidity management. The supply of 3-month and 6-month Exchange Fund bills will be increased by a total of HK$15,000 million and HK$6,000 million, expanded in three tranches tendered on the 15th, 22nd and 29th January.

Venue News

HKEx and LME transaction completes

On 6th December, the completion of the LME transaction was announced. The LME will be promoted by the HKEx in Mainland China and across Asia as the metals trading venue of choice. The LME enjoyed a record year in 2012 with trading up 10%.

The South China Morning Post reported that the price of £1.388 billion was set as an ‘auspicious’ figure - it is not uncommon for local deals to be agreed at ‘lucky’ levels.

The new HKEx board structure has now also been announced with Romesh Lamba (HKEx) and Martin Abbott (LME) appointed as Co-heads of Global Markets. Calvin Tai and Bryan Chan (both HKEx) will now Co-head the Equities and FIC business. Gerald Greiner has become the Global Head of Clearing (he was previously the HKEx COO).

For the full announcement with more detail on specific responsibilities see here:

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2013/Documents/130107news.pdf

HKEx opens data centre in Shanghai

The HKEx commenced Mainland operations of a market data centre in Shanghai under a wholly owned subsidiary called Ganghui Financial Services Ltd (Shanghai). Operations started on December 11th allowing Mainland vendors access to HKEx market data real time.

This is a significant step aimed at strengthening the HKEx development in China as such information has previously only been available in Hong Kong. It is hoped this will result in an increase in trading volumes.

Conclusions to the consultation on Board Diversity released

Following a positive reaction to the public consultation, the HKEx has concluded that board diversity measures should be included in the Corporate Governance Code and the Corporate Governance Report. The Code will be Recommended Best Practice and will act as a means of communication with investors rather than as rules, encouraging board diversity in the broad sense rather than focusing on gender.

The provisions become effective on September 1st 2013, the full report can be accessed here:

http://www.hkex.com.hk/eng/newsconsul/mktconsul/Documents/cp201209cc.pdf

HKEx boss recieves HK$8.92m bonus

Charles Li, CEO of the Hong Kong Exchanges and Clearing Group, has received a bonus of HK$8.92m for the purchase of HKEx shares. A further HK$103.48 million for the purchase of shares was provided for other employees including a reserve of HK$10 million for new employees joining in 2013.

Source:www.sfc.hk

www.hkex.com.hk

www.thestandard.com.hk

www.scmp.com.HK

ContactEmail: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170

Amended QFII Regulations (Effective 14th December 2012)

Institutional investors will now be able to apply for quota exceeding US$1 billion and Qualified Foreign Institutional Investors (“QFII”) will be able to open a special deposit account to trade index futures. 2012 saw a number of relaxations in the regulation governing the activities of QFII and the year finished with a round of changes that continue to open up the range and extent of foreign participation in the Mainland market. Currently, foreign investment makes up around 1% of the total market capitalisation.

Other changes in the regulations are summarised below for your reference.

— An operational guidance on QFII domestic account administration (for trial implementation) is provided by SAFE. According to the guidance:

1) QFIIs shall open one RMB basic deposit account in the name of QFII according to PBOC’s regulations on Opening & Using of RMB Bank Settlement Accounts of Overseas Institutions.

2) A special deposit account can be opened for i) QFII domestic securities investment (“Special deposit account (securities trading)”), and ii) Index futures investment (“Special deposit account (futures trading)” with qualified futures margin custodians.

3) QFII can open no more than 6 special deposit accounts (securities trading, and maximum 3 for each stock exchange) for its clients’ funds. Each account shall have a minimum opening balance of at least US$20 million of quota. Previously, QFII could only open one RMB special account for all its underlying clients under the name of “QFII- clients’ funds”.

— Upon the termination of the principle lock-up period, QFIIs can process the repatriation of principal and profit by batch. The total amount of the repatriation per month shall be no more than 20% of its total asset of QFII investments at the end of last year. SAFE will decrease the QFIIs investment quota accordingly.

— China open-ended funds can, based on the weekly subscribed or redeemed net amount, process the injection and repatriation on a weekly basis (previously monthly). A China open ended-fund is defined as a fund which is at least 70% invested in China market.

QFIIs other than China open-ended funds can apply via a written application to repatriate by batch.

The total amount of repatriation per month shall be no more than 20% of its total asset of QFII investments at the end of the previous year.

— Requirement of pre-approval for an injection above US$50 million is removed.

— Various processes for the remittance of QFII quota, and of the accumulated proceeds realised with purchased foreign exchange, are outlined in more detail.

Chinese Market Structure Update


Monthly ADT (Dec 2012) USD$24.32bn 89.45%





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Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types)

Fig 2: Equities Daily Turnover per venue - December 2012

Fig 3: Futures HKFE HHI monthly ADT

Fig 4: Futures Daily Turnover per venue - December�2012

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Global Market Structure Chinese Newsletter Issue 24

5Chinese Market Structure Monthly Newsletter

— Custodian banks shall submit the Monthly Report I & II on Domestic Securities Investment by the QFII within 5 working days after the end of each calendar month. Previously, the timeline was within 8 working days.

China scraps QFII limit on Sovereign Funds

China’s foreign exchange regulator, SAFE, has scrapped a ceiling on investments by overseas sovereign wealth funds (“SWF”) and central banks in its capital markets. The ability to exceed the $1 billion limit by SWFs, central banks and monetary authorities come as part of the government’s efforts to encourage long-term foreign ownership and boost equity markets.

It is considered that such a move to introduce more long-term funds from abroad will help improve market confidence, promote stable growth in capital markets and provide robust investment returns to domestic investors. The decision comes after the government more than doubled its total QFII quota to US$80 billion from $30 billion.

As of 31st December 2012, the Qatar Investment Fund, the Hong Kong Monetary Authority, Norges Bank, the Government of Singapore Investment Corp. and Temasek Holdings Pte.’s Fullerton Fund Management Co. have all reached the $1 billion limit.

15 new approved QFII licenses in November & December 2012

15 foreign institutions got the QFII licenses and another US$3.25 billion investment quota was approved by SAFE in November and December. By the end of 2012, there are 207 QFIIs in A-share market with US$37.443 billion quota in total of the US$80 billion available.

Institution Name Approved Date

JPMorgan Asset Management Taiwan 2012-11-5

AEGON USA Investment Management, LLC 2012-11-5

CDH Investment Advisory Private Limited 2012-11-7

Skandinaviska Enskilda Banken AB (publ) 2012-11-12

Harvest Global Investments Limited 2012-11-12

Greystone Managed Investments Inc. 2012-11-21

Uni-President Assets Management Corporation 2012-11-21

Daiwa SB Investments Ltd. 2012-11-19

APS Asset Management Pte Ltd 2012-11-27

CITIC Securities International Investment Management (HK) Limited 2012-12-11

Pacific Alliance Investment Management (HK) Limited 2012-12-11

E Fund Management (Hongkong) Co., Limited 2012-12-11

Hillhouse Capital Management Limited 2012-12-11

SinoPac Securities Investment Trust Co., Ltd 2012-12-13

China Asset Management (Hong Kong) Limited 2012-12-25

Source: CSRC & SAFE

The best QDII fund posted a 25% performance in 2012

QDII funds outperformed all the other mutual funds in domestic market 2012. The best performer was Fortune SG Overseas China Stock Fund, posting a 25.26% performance; whilst the worse fund was CITIC Prudential Global Commodity Fund, dropping 15.5%. QDII funds investing to Greater China market, Asia Pacific market and emerging markets outperformed the other QDIIs, increasing by 18.18%, 15.82% and 16.61% respectively.

According to Lipper’s latest asset data analysis, QFII A-share funds grew an average 16.94% in December 2012, comparing to a loss of 9.11% in the first 11 months of 2012.

New Funds Law to protect fund investors; CSRC proposes to widen distribution channels

On 28th December 2012, the executive committee of the 11th National People’s Congress ratified the revision to the Law of the People’s Republic of China on Securities Investment Funds, which will take effect as of 1st June 2013. The New Funds Law sets provisions on the protection of fund investors, limitations on the investments of the fund practitioners and the equity incentives and governance of fund companies and covers the supervision on the private placement funds for the first time.

The New Funds Law specifies the boundary of “public offering” and “non public offering”, includes the private placement funds into the scope of regulation as financial products of financial properties, and stipulates code of conducts and systematic arrangement significantly different with the public offerings so to implement proper and limited supervision on the private placement funds.

CSRC has also issued a consultation paper to allow third-party electronic platforms to sell securities investment funds. Securities investment funds are currently sold to the public in China predominantly through commercial banks but also through fund management companies and securities companies.

CSRC strengthens insider trading rules

Under new regulation, mergers and acquisitions involving material asset reorganisation will be subject to greater scrutiny. CSRC has issued the Tentative Provisions on Strengthening the Regulation of Unusual Share Transactions in Connection with Material Asset Reorganization of Listed Companies and Article 2 states:

A listed company and its transaction counterparties, as well as the controlling shareholder, de facto controller(s), the securities company and securities services firms that provide services for the material asset reorganisation in question and other entities involved in the material asset reorganisation shall duly manage information concerning the material asset reorganisation and shall duly carry out the registration of well informed persons with inside information in strict accordance with laws, administrative regulations and rules, and strengthen their awareness of the need to maintain confidentiality (translation taken from www.chinalawandpractice.com).

If a transaction is found to be in breach of the regulations, CSRC will be able to review the transaction. It is likely to lead to lawyers and financial advisors needing to do more due diligence, especially if there are discrepancies after the stock exchange’s review. There are some concerns that this in turn will increase due diligence costs for businesses in China.

The rule became effective on 17th December 2012.

Venue news

Shanghai Stock Exchange and Shenzhen Stock Exchange set new delisting rules

Following a consultation earlier in 2012, both the Shanghai Stock Exchange (“SSE”) and Shenzhen Stock Exchange (“SZSE”) have finalised a set of delisting rules aiming to improve the delisting process and protecting the interests of investors. The delisting system for listed companies will involve a risk alert, listing suspension, listing resumption, listing termination, delisting arrangement, delisted share transfer and re-listing. The exchanges feel that rules will not only reveal the risks in delisted companies, but also help investors make reasonable investment decisions.

6Chinese Market Structure Monthly Newsletter

T+0 Money Market Fund launched

The first exchange-traded T+0 money market fund was launched on 11th December 2012. The product was jointly launched by China Universal Asset Management Co. Ltd, the SSE and China Securities Depository and Clearing Corp. Ltd. Sale proceeds on the T+0 money market funds are available same day and the funds can be bought and sold the same day. Previously the typical settlement cycle for money market fund was 2 to 3 days on average.

China to allow OTC gold trading, Shanghai plans ETFs

China is determined to expand its domestic market for gold to the international community and develop Shanghai into a major gold trading center. The country will allow over-the-counter (“OTC”) gold trading between banks on the 3rd of December, whilst plans to launch gold ETFs on the Shanghai Stock Exchange could take off early next year subject to government approval.

The introduction of interbank trading is intended to develop China into a liquid market as the absence of an OTC market has restricted banks from becoming market makers in gold. Currently, banks are limited to trading physical gold on the Shanghai Gold Exchange, the world’s biggest platform for trading physical gold.

Karachi Stock Exchange seeks partnership with SSE

It has been reported that the Karachi Stock Exchange, amongst one of the world’s best performers in 2012, is considering to privatise 40% of its shares and is looking for strategic investors. Chairman Muneer Kamal met top executives of SSE this week and talked about possibilities of closer cooperation including in strategic investment, management and cross listing.

Sources www.chinalawandpractice.com

www.thestar.com.my

www.shanghaidaily.com

www.bloomberg.com

www.ibtimes.com

www.english.cri.cn

www.chinascopefinancial.com


Proposal to relax FIA application and investment scope

The Executive Yuan has passed the draft amendment of the “Statute for Investment by Overseas Chinese” and the “Statute for Investment by Foreign Nationals” to relax inbound investment, giving foreign investors more flexibility as only investments exceeding US$1 million will require prior approval from the Ministry of Economic Affairs (“MOEA”).

For investments not exceeding US$ 1 million, however, investors may lodge the application with MOEA after they commence investing in Taiwan. Under current regulations, foreign investors are required to obtain Foreign Investment Approval (“FIA”) from the Investment Commission under the MOEA before they start to invest in Taiwan (mainly for unlisted securities).

The draft proposal will be sent to the Legislative Yuan for approval and is expected to be implemented in 2013. With a revised and simplified FIA application, the government will be able to attract more foreign capital to help boost domestic economic growth and the country’s competitiveness.

Taiwan signed Double Taxation Treaty with Thailand

Taiwan’s Ministry of Finance has signed an agreement with Thailand which will prevent double taxation and deter tax evasion. The Double Taxation Treaty (“DTT”) agreement between Taiwan and Thailand, will allow foreign investors from Thailand to enjoy a lower tax rate i.e. 5% or 10% on dividend incomes and 10% on interest incomes.

The agreement took effect on 19th December 2012, and became the 25th DTT country with Taiwan.

Banks in Taiwan to engage in RMB business

The cross-strait currency clearance mechanism has commenced after the People’s Bank of China appointed the Taipei branch of the Bank of China (“BOC”) as the renminbi clearance bank in Taiwan on 12th December, 2012. The Financial Supervisory Commission (FSC) stated that this mechanism will allow domestic banks to engage in renminbi related business, including deposits, remittances, and loans.

The Bank of Taiwan and BOC have both been authorised by their respective central banks to provide cross-strait financial exchanges and currency clearance services.

FSC considers QDII from China to invest in Taiwan securities market

The Financial Supervisory Commission (“FSC”) is considering propsals to allow bank type Qualified Domestic Institutional Investors (“QDII”) from China approved by the China Banking Regulatory Commission to invest in Taiwan securities market 2012.

Taiwan Market Structure Update




Global Market Structure Taiwan Newsletter Issue 24





Fig 1: Equities Taiwan market monthly ADT (lit, auction & non-displayed order types)

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Fig 2: Cash Equities Daily Turnover per venue - December 2012

Fig 3: Futures FTX TAIEX monthly ADT

Fig 4: Futures Daily Turnover per venue - December 2012

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8Taiwan Market Structure Monthly Newsletter

Futures transaction tax rate may be reduced to 0.001%

The FSC and the Futures Association have proposed to the Ministry of Finance a reduction in the futures transaction tax rate from 0.004% to 0.001%. The FSC and MOF will further discuss the topic and make an announcement once consensus is reached.

Venue News

FSC plan to allow day trading in 2Q 2013; T-shares may list

The FSC has proposed allowing buy-then-sell same-day turnaround trading, also known as day trading. It is expected to be implemented in Q2 2013 at the earliest.

A meeting was held between the Taiwan Securities Association (“TWSA”) and various industry representatives including the Taiwan Stock Exchange (“TWSE”) and the Brokerage Business Committee, the Electronic Business Committee and the Foreign Broker Committee sub-groups. Representatives of GreTai (“GTSM”) and the Securities and Futures Bureau (“SFB”) also attended.

There were three main topics on the agenda:

1. Qualification of investors. Although the TWSE had suggested that investors should have an account open for 3 months, and have executed at least 10 trades, the TWSA did not feel this restriction was necessary. It was agreed that no restrictions should apply.

2. Daily limits. Currently brokers are required to set a limit and Foreign Institutional Investors (“FINI”) are able to gain an exemption from this requirement. It was agreed that 100% of the limit could be used for day trading and the FSB would discuss further with the SFB how this would apply to FINIs given there is no limit in place.

3. Product scope and margin requirements. The TWSE proposed all securities should be in scope with a 10% margin requirement whereas the TWSA suggested that the Taiwan 50, the Taiwan mid-cap 100, Taiwan Tech and GreTai 50 indices be in scope with no margin requirement as brokers feel that if margin is required then they may not be able to facilitate client business. This point will be discussed further.

The up-tick rule is also currently under consideration for small and medium cap stocks.

Further, it is also expected that T-shares (China-registered companies) may be able to list on Taiwanese securities market and offer a wide range of quality financial products.

GreTai to release trading data

Members of the GreTai Market are going to start receiving monthly reports on issued and trading information via email. The reports will also be posted on the exchange website at www.gretai.org.tw

The venue has been endeavouring to be the ‘protagonist of economic vitality and the cradle of successful business’ and to ‘expand capital access and solid investment’. The provision of transparent trading data looks to future those aims.

Sourceswww.sfb.gov.tw

www.twse.com.tw

www.gretai.org.tw/en

www.fsc.gov.tw ContactEmail: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170

Pre-trade controls for bourses and brokers confirmed; increased capital requirements for brokers

In a bid to avoid future flash-crash like situations in the local markets, SEBI has unveiled strict norms asking bourses to ensure that member brokers have implemented appropriate pre-trade risk control measures to keep aberrant orders from getting executed. Below are the highlights

— Stock exchanges need to reject all orders greater than Rs 10 Crore for execution on stocks, Exchange Traded Funds (ETFs), Index Futures and Stock futures

— Exchanges need to ensure that all stock brokers have appropriate risk control checks implemented on their terminals based on the risk profiles of their respective clients

— Bourses to also ensure that their brokers have an appropriate mechanism to limit the cumulative value of all unexecuted orders through their terminals at a certain threshold level

— Bourses to make it mandatory for stock brokers to implement a “Risk Reduction Mode” under which all unexecuted orders from their terminals will be cancelled when the broker utilises >= 90% of its available collateral

— The “Dynamic Price Bands” for stocks on which derivatives are traded, stocks on indices on which derivatives are available, index futures and stock futures have been narrowed from 20% to 10%. These can be relaxed in increments of 5% each if the bourses deem fit on observing a market trend in either direction

The bourses have been asked to implement the above guidelines within a month after the release of the circular.

SEBI has also revised the base minimum capital (BMC) deposit requirement for brokers (offering algorithmic trading) to a maximum of Rs 50 lakhs. The range of the deposit will now be between Rs.10 lakh and Rs.50 lakh for brokers on bourses with nationwide trading terminals. For members of other stock exchanges, the requirement would be 40% of the deposit for national level exchanges. The new rules will require brokers and trading members to deposit Rs.10 lakh if they opt for only proprietary trading without the algorithmic option, Rs.15 lakh for trading only on behalf of clients (without proprietary and algorithmic options), Rs.25 lakh for proprietary trading and trading on behalf of clients (without algorithmic trading) and Rs.50 lakh for trading with the algorithmic option.

SEBI circulars are available here:

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1355406529538.pdf


Sourceshttp://in.reuters.com/article/2012/12/14/markets-india-sebi-flashcrash-idINDEE8BD01F20121214

http://www.thehindu.com/business/markets/sebi-initiative-to-reduce-risk-on-stock-exchanges/article4196606.ece

http://www.thehindubusinessline.com/markets/sebi-raises-minimum-capital-requirements-for-brokers/article4217897.ece?homepage=true

http://www.business-standard.com/india/news/sebi-hikes-minimum-deposit-for-brokers/496130/

Indian Market Structure Update




Global Market Structure Indian Newsletter Issue 24





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10Indian Market Structure Monthly Newsletter

GAAR implementation pushed to 2016; markets cheer, reach new highs

After reviewing the Shome committee report and accepting all of its major recommendations with slight modifications where required, the Government announced the postponement of implementation of the controversial GAAR (General Anti-Avoidance Rules) aimed at curbing tax evasion, to April 2016.

“ Having considered all the circumstances and relevant factors, the government has decided that provisions of Chapter 10A of the Income Tax Act (dealing with GAAR) will come into force from 1st April, 2016 as against 1st April, 2014. The modifications that we have done are fair, non-discriminatory, just and strike a balance between interest of revenue and interest of investors. So, all apprehensions should now be set addressed” finance minister P Chidambaram said.

According to the new code: -

— There will be a threshold limit of Rs 3 crore of tax benefit for invocation of GAAR

— The GAAR provisions will override the double taxation avoidance agreement (“DTAA”) benefits if the arrangements were intended solely to evade taxes and will be considered as ‘ impermissible arrangements’

— Investments made by Non-Resident Indians (“NRIs”) in FIIs, including Participatory Notes will not be covered by the provisions of GAAR

— Investments made before 30th August, 2010, the date of introduction of the Direct Taxes Code (“DTC”) Bill, will be exempt from the provisions of GAAR

Both NSE and BSE reached their respective two year highs after the announcement was made signifying that the decision has been positively received by the investor community.

http://articles.economictimes.indiatimes.com/2013-01-14/news/36331701_1_gaar-provisions-shome-panel-shome-committee

http://timesofindia.indiatimes.com/business/india-business/Govt-postpones-GAAR-implementation-by-2-years-to-2016/articleshow/18017769.cms?

http://in.reuters.com/article/2013/01/14/sensex-gaar-rbi-infosys-dlf-idINDEE90D06120130114

Process for QFIs to obtain Personal Account Numbers rationalised

As announced in a SEBI Circular issued on 4th January, the process for obtaining a Personal Account Numbers or (“PAN”) has been changed to allow the verification process to take place on line.

The SEBI Circular can be accessed here:


SEBI consults on stricter buyback norms and corporate governance code

SEBI has released public consultations proposing modifications to the share buyback framework and the corporate governance code.

Since it was felt that buyback of shares through the open market route had failed to achieve its purpose, the following changes to the current regime are suggested:

— Companies opting for share buyback to mandatorily purchase at least 50% of the initial offer size

— The buyback process to be completed within three months of the offer (from one year earlier)

— 25% of the maximum buyback amount to be put in an escrow account

— Companies not to be allowed to raise public funds for two years after the buyback is completed

— Companies unable to buyback 100% of the offer size not to be allowed to attempt another buyback for at least one year

— Companies not to be allowed to deal in off-market mode during buyback offers

— Tender route to be made compulsory if buyback size is greater than 15% of the paid up capital & free reserves

— Stricter disclosure rules to be applicable for buyback offers

In a bid to tighten the corporate governance norms, SEBI has proposed tougher guidelines for listed companies to make their functioning transparent and to enhance investors’ trust in the capital market. In a consultation released on the subject, a number of suggestions have been made including

— Approval of managerial remuneration by disinterested shareholders — Disclosure of Whistle blower mechanisms to be made compulsory— implementation of an orderly succession planning— Appointment of one independent director by small shareholders— Certification course and training for independent directors— Prohibiting grant of affirmative rights to certain investors— Greater monitoring by institutional investors— Enforcement for non-compliance of norms

The consultations are open till 31st January and can be accessed here:



Sourceshttp://business-standard.com/india/news/sebi-proposes-overhaulshare-buyback-guidelines/497605/

http://www.thehindubusinessline.com/markets/sebi-buyback-plan-pitches-for-50-floor-3month-window/article4265472.ece?ref=wl_opinion

http://www.livemint.com/Politics/F5qZGc4F7cBnoomGxBd47I/Sebi-aims-to-tighten-norms-for-corporate-governance.html

http://www.thehindu.com/business/markets/sebi-moots-tougher-norms-for-corporate-governance/article4272981.ece

Trading of liquid index ETFs permitted in the SLB segment

SEBI has allowed “liquid” Index ETFs (Exchange Traded Funds) to be traded in the stock lending and borrowing (“SLB”) segment opening doors to the short selling market activity. An Index ETF would be considered ‘liquid’, if it has traded on at least 80% of the days over the past six months or its impact cost over the past six months is less than or equal to one per cent. The move is expected to improve volumes in the SLB segment.

http://www.moneycontrol.com/news/market-news/sebi-allows-liquid-index-etfs-tradingshort-selling-mkt_786182.html

http://articles.economictimes.indiatimes.com/2012-11-23/news/35302458_1_slb-segment-capital-markets-regulator-sebi

SEBI looks to strengthen its market surveillance capabilities

SEBI is looking to deploy the latest technology and completely overhaul is market surveillance and network monitoring infrastructure. SEBI will be engaging a leading IT service provider for 24*7 monitoring of its Integrated Market Surveillance System (IMSS) through a dedicated monitoring operations center.

The operations centre would be used for remote monitoring of security and surveillance infrastructure of IMSS, provide periodic security status reports and real-time status reports through an online facility in addition to analyse market environment and propose changes in light of latest security best practices and latest security threats.

http://business-standard.com/india/news/sebi-to-strengthen-surveillance-system/202530/on

11Indian Market Structure Monthly Newsletter

Personnel Changes

NSE appoints Chitra Ramkrishna as the new MD and CEO

The National Stock Exchange (“NSE”) announced that Ms. Chitra Ramakrishna will assume the role as its new MD & CEO effective 1st April 2013 after the tenure of the current CEO, Mr. Ravi Narain ends on 31st March. Chitra is currently the joint MD and has been with the bourse since its inception in 1992.

Narain would continue to be associated with the bourse as a vice-chairman in non-executive capacity with effect from 1st April, 2013. He would also continue to serve on the board of NSE and the World Federation of Exchanges and as Chairman of its working committee.

http://blogs.wsj.com/dealjournalindia/2012/11/27/nse-names-new-chief/

http://www.reuters.com/article/2012/11/26/nse-ceo-idUSL4N0962CK20121126

S Raman appointed as Whole Time Member at SEBI; portfolios reshuffled

SEBI has announced the appointment of Mr. S Raman as its new whole time member, for five years. Mr. Raman was earlier working as the CMD of Canara Bank. He has also worked with Union Bank of India and Bank of India handling various portfolios including corporate credit, international banking and human resources among others.

At SEBI he will be entrusted key departments of Investment Management, Enforcement and Enquiries and Adjudication. The Investment management department manages foreign institutional investors, mutual funds and collective investment schemes (“CIS”) which have been the focus of regulatory policy recently. Mr. Rajeev Kumar Agarwal will now handle market regulation, surveillance and legal affairs, while Mr. Prashant Saran, who recently got a second term at Sebi, will handle corporation finance department, investigations and investor education.

http://articles.economictimes.indiatimes.com/2012-12-28/news/36036592_1_prashant-saran-s-raman-sebi-today

http://www.business-standard.com/india/news/sebi-rejigs-board-portfolio-after-new-entry/201639/on

SEBI revamps committee on disclosure & accounting standards

The 17 member Sebi Committee on Disclosures and Accounting Standards set up in 2006 by SEBI to advise on improving disclosure framework for listed companies and accounting practices of various market entities will now be headed by Mr. Ishaat Hussain.

http://www.hindustantimes.com/News-Feed/BusinessBankingInsurance/SEBI-rejigs-committee-on-disclosure-accounting-standards/Article1-973636.aspx

Venue Updates

BSE shortlists 14 banks to run its public issue, eyes US$1 billion

The Bombay Stock Exchange (“BSE”) has shortlisted a total of 14 banks to handle its public issue next year through which the bourse is expecting to raise US$1 billion and utilise the funds to take on its competition more aggressively.

Bank of America Merrill Lynch, JPMorgan, Barclays, UBS join Indian banks Kotak Mahindra Bank and ICICI Bank as lead managers of the planned IPO.

It was also reported that both NSE and BSE have successfully separated their commercial and regulatory functions. This was prescribed by SEBI as a pre-requisite for stock exchanges looking to seek public funds to avoid conflicts of interest between its regulatory obligations and commercial aspirations.

http://www.dnaindia.com/money/report_bse-picks-14-banks-for-ipo-seeking-1-billion-value_1774285

http://www.firstpost.com/fwire/bse-eyes-ipo-next-year-seeks-1-billion-value-548630.html

http://www.mydigitalfc.com/news/regulatory-functions-separated-bse-nse-692

MCX-SX receives ‘recognised stock exchange’ status and SEBI nod

MCX-SX has been approved by the Corporate Affairs Ministry as a “recognised stock exchange” which would allow public companies to list their shares on the bourse’s platform. The status was granted shortly after SEBI granted its final approval and commencement certificate to the exchange.

The exchange also conducted mock trading session on 19th November to put its systems through complete testing cycle under live market conditions. MCX-SX said it is in “complete state of readiness to go live and the exchange would commence operations in equity trading as soon as it reaches the critical mass of registering 350 members.”

MCX Stock Exchange has also signed the voluntary commitment to the United Nation’s Sustainable Stock Exchanges initiative to promote long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on its platform.

http://www.livemint.com/Money/5TGTAuqkG9a46a7prxuvXO/Govt-notifies-MCXSX-as-recognised-stock-exchange.html

http://articles.economictimes.indiatimes.com/2012-12-21/news/35934565_1_mcx-sx-mcx-stock-exchange-ceo-joseph-massey

http://www.moneycontrol.com/news/market-news/mcx-sx-holds-mock-testingstock-trading-platform_784669.html

NSE, BSE launch new indices

The National Stock Exchange (“NSE”) has launched three new indices - the CNX Low Volatility Index, the CNX High Beta Index and the CNX Alpha Index. While all three indices comprise of 50 securities chosen from the top 300 companies on the NSE based on their average free-float market capitalisation and aggregate turnover for the last six months, the weights assigned for each index are different.

— The CNX Low Volatility index aims to measure the performance of the least volatile securities listed on the NSE and weights are assigned based on the volatility values (highest weight for lowest volatility)

— The CNX High Beta Index aims to measure the performance of the stocks listed on NSE that have high beta and weights are assigned based on their Beta values (highest weight for highest Beta)

— CNX Alpha Index, aims to measure the performance of those NSE stocks with high alpha value and accordingly those scrips with the highest alpha will have the highest weight in the index

The Bombay Stock Exchange (“BSE”) meanwhile launched BSE CARBONEX, the first-of-its-kind Index in India and in emerging markets, which takes a strategic view of organisational commitment to climate change mitigation. It will enable investors to track the performance of the constituent companies of BSE-100 Index regarding their commitment to Green House Gases emission reductions.

The BSE also launched an SME index aiming measure the growth in the SME platform investors’ wealth over a period of time. The index will comprise of SME stocks listed on the BSE SME platform.

Changes were also made to BSE indices for the mid-cap and small-cap segments, effective 14th January. A total of 12 new stocks will be added to the BSE Mid-Cap index, while eight existing ones would be removed. In the BSE Small-Cap index, the exchange would add 28 new scrips while removing 38 existing ones.

http://www.moneycontrol.com/news/market-news/nse-launches-three-new-indices_784579.html

http://www.moneyguruindia.com/article.php?cid=4400&id=4

http://www.financialexpress.com/news/bombay-stock-exchange-launches-sme-index-that-tracks-investor-wealth/1045269

http://profit.ndtv.com/news/market/article-bombay-stock-exchange-rejigs-mid-cap-small-cap-indices-315889

Change in tax on dividend and interest income

As of 1st January 2013, the tax rate on dividends and interest income has been changed to finance the reconstruction of areas affected by the Great East Japan Earthquake. The Special Taxation Measure Law provides for a tax hike that will be effective for the next 25 years. The increase represents a 2.1% surtax of the original withholding tax rates and breaks down as follows:

2013 7.147% for listed shares 20.42% unlisted and over 3% holdings 15.315% Interest

2014-2037 15.315% for listed shares 20.42% unlisted and over 3% holdings 15.315% Interest

From 2038 15% for listed shares 20% unlisted and over 3% holdings 15% Interest

More information is available if you would like to get in contact.

FSA consults on audit procedures

In a paper titled “Standard to Address Risks of Fraud in an Audit (Provisional Translation)”, the Japanese Financial Services Authority seeks to address some of the perceived issues arising from recent cases of inappropriate disclosure including fraudulent financial reporting. When these cases were reviewed, it was found that financial statement audits were not effectively conducted. Stakeholders have pointed out that more effective audit procedures should be put in place to minimise the risk of further instances.

The paper focuses on material misstatements on financial statements and established new standards for addressing the risk of fraud. The consultation is open until 25th January and can be access here:

http://www.fsa.go.jp/en/news/2012/20121221-1.html

Venue News

Japan Exchange Group commences trading as single venue

On 4th January, the newly established Japan Exchanges Group Inc. (“JPX”), the combination of the Tokyo Stock Exchange (“TSE”) and the Osaka Stock Exchange (“OSE”) began trading. The final procedural approvals were given by the Japanese FSA on 11th December.

Japanese Market Structure Update




Global Market Structure Japanese Newsletter Issue 24





Fig 1: Equities Japanese market monthly ADT (lit & auction types)

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Fig 3: Futures OSE NIKKE monthly ADT


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Sapporo

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13Japanese Market Structure Monthly Newsletter

The JPX is the third largest exchange globally by market capitalisation. According to Bloomberg, the Group is looking at an ¥11 billion operating profit and a revenue of ¥62.5 billion when the full year finished in March.

TSE trading overview for 2012

The TSE has released the following data for trading in 2012.

Further data can be found at :

http://www.tse.or.jp/english/news/30/130107_a.html

Japan Exchange Group to trade Nifty futures

The National Stock Exchange (“NSE”) has agreed with the Japan Exchange Group (“JPX”) that futures contracts based on the main NSE index may be traded from 2014. The contracts will be available by March 2014.

‘Yen-denominated S&P CNX Nifty Index Futures contracts will help investors in Japan to effectively diversify their portfolios‘ said Ravi Narain, CEO of the NSE.

OSE to discount Give-Up fee rate for Nikkei 225 mini

The OSE has announced that they will temporarily make the following changes in order to activate transactions utilising Give-Up System.

1. Target Contract: Nikkei 225 mini 2. Applicable Period: From January to December 2013 (One year) 3. Discounted Give-Up fee rate: 1 yen per one unit of executed Give-Up (Fee rate for contracts other than Nikkei 225 mini remains unchanged.) 4. Note: Applicable Period or discounted Give-Up fee rate may be

modified at OSE’S discretion based on the trading situation of Nikkei 225 mini or the usage of Give-Up system. In that case, OSE will make an announcement to that effect in advance.

Japan Exchange Group signs MoU with Istanbul Stock Exchange

In order to provide diversification to investors and ease the listing of mutual fund options, the two venues have signed an agreement of cooperation. In line with the recent merger of the TSE and OSE, the Borsa Istanbul and the Istanbul Gold Exchange are now operating under a common umbrella company.

Trading Volumes

Trading Value Change from

month last yearDaily average

1st Section 519,575 3,066,464 - 349.696 12,364

2nd Section 7,679 8,878 -1,567 36

Mothers 2,416 31,993 -12,860 129

ETF 1,675 19,508 -7,624 79

REIT 13.8 32,152 +3,488 130

Equtiy Market - Annual Trading Data (Including ToSTNeT but excluding 12/28 ToSTNeT)) (Volume: mil. Shares/mil. units, Value: 100mil yen)

(Including foreign stocks)

Equity Market - December Trading Data (Including ToSTNeT but excluding 12/28 ToSTNeT)) (Volume: mil. Shares/mil. units, Value: 100mil yen)

(Including foreign stocks)

Trading Volumes

Trading Value Change

from last month

Change from month last year

Daily average

1st Section 55,061 301,086 +43,259 +101,443 15,847

2nd Section 593 809 +269 +161 43

Mothers 330 3,799 +278 +1,163 200

ETF 177 2,000 +354 +376 105

REIT 1.86 3,531 +663 +1,,916 186

Trading Volumes

Open Interest at end of month

Change from last year Daily average

Index Futures 17,538,028 +2,104,072 71,718 603,985

(TOPIX Futures) 15,192,439 +584,274 61,260 430,381

JGB-Futures 8,897,349 +2,006,405 35,876 77,587

10-year JGB-Futures 8,865,284 +1,982,074 35,747 77,292

Trading Volumes


Change from last month


Daily average

Index Futures 2,315,862 +1,269,231 +541,501 121,887 603,985

(TOPIX Futures) 2,072,003 +1,210,401 +446,980 109,053 430,381

JGB-Futures 957,860 +316,565 +291,529 50,414 77,587

10-year JGB-Futures 956,694 +315,961 +294,795 50,352 77,292

Derivative Market - Annual Trading Data (Including ToSTNeT) (Volume/Open Interest: Units)

Derivative Market - December Trading Data (Including ToSTNeT) (Volume/Open Interest: Units)

Trading Volumes

Trading Value Change

from last month


Daily average

Index Options

4,619 -3,297 +2,513 243 5,267

Individual Options

58,994 +36,256 +45,302 3,105 60,962

Options on JGB-Futures

167,263 -5,656 -4,516 8,804 15,954

Trading Volumes


Change from last year Daily average

Index Options 22,683 +1,341 91 5,267

Individual Options 433,602 -167,554 1,748 60,962

Options on JGB-Futures 2,283,839 +430,167 9,209 15,954

Options Market - December Trading Data (Including ToSTNeT) (Volume/Open Interest: Units)

Options Market - Annual Trading Data (Including ToSTNeT) (Volume/Open Interest: Units)

14Japanese Market Structure Monthly Newsletter

SBI Japannext sets new daily turnover record; delays deployment of OUCH

Following the relaxation in the TOB rule that was discouraging large institutional investors from executing trades on the alternate venues called Proprietary Trading Systems (“PTS”), SBI Japannext has enjoyed increased volumes. On 19th December, a new all-time daily turnover record of ¥89.5 billion (US$1.07 million) was achieved surpassing the previous daily turnover record of ¥77.4 billion (US$967 million).

SBI were due to implement OUCH on 15th January but have announced that this has been pushed back to 12th February 2013. The SBI documentation states

‘ The message protocol of OUCH is widely used and considered an industry standard, and is ideal for low latency messaging. By utilising the OUCH protocol, participants are able to access different markets and liquidity pools operated by Japannext PTS.”

The full specifications can be accessed here:

http://en.japannext.co.jp/pub_data/pub_onboarding/Japannext_PTS_OUCH_v1.2.pdf

Correction from Issue 22 – Japan

In our last issue of the newsletter, a story was included titled ‘Japan Securities Clearing Corporation launches first Asia Pacific CCP”. We would like to correct the piece as it is the first Yen denominated CCP in Asia Pacific rather than the first CCP for OTC derivatives. AsiaClear was in fact set up by SGX in 2009 and has cleared over US$300 billion of business.

Sourcewww.tse.or.jp

www.bloomberg.com

www.reuters.com

www.business-standard.com

www.ft.com

www.japannext.co.jp


Parliament rejects the Capital Markets Act

On 22nd November, the South Korean Parliament unexpectedly did not approve the Capital Markets Act, which allows regulators to require central clearing of OTC derivatives, meaning that mandatory clearing may now not be implemented until October 2013. As a result Korea will miss the globally agreed end 2012 deadline to centrally clear standardised OTC derivatives.

The Act included several provisions to allow local brokerage firms with equity capital of more than 3 trillion Korean won to offer investment banking services, allow alternative trading systems and a central clearing house for over-the-counter derivatives to be set up. Lastly, it would also give the financial regulator the power to require mandatory clearing of certain OTC derivatives.

Plans to delay introduction of Basel lll

South Korea’s financial regulator said that it will delay the introduction of Basel III framework in a bid to observe further development in major advanced countries. Jung Ji-won, Director General at the Financial Services Commission (“FSC”), said that Seoul have already completed most preparations necessary for the introduction of the rule, but the country needs to consider the global trend in deciding on when to adopt the capital adequacy requirement rule.

Venue News

Sevenfold growth seen in South Korean hedge fund industry

South Korea’s hedge industry has grown seven fold year on year since December 2011. According to Financial Services Commission (“FSC”), the assets managed by local hedge funds reached 1,017bn won (US$940 million) in Nov 2012 versus 149bn won in Dec 2011 and the number of hedge funds grew from 12 last year to 19 in Nov 2012.

The FSC noted that institutional investors such as pension funds could have a great interest investing into the homegrown hedge funds as the hedge funds serve as an alternative investment that offer higher investment return amid the protracted trend of low interest rates.

KRX readies to meet the G20 mandate on OTC derivatives

KRX, the South Korean exchange, plans to launch voluntary clearing of won-denominated interest rate swaps in April 2013. Countries including South Korea agreed in 2009 as part of a G20 commitment to ensure that OTC derivatives be processed through clearing houses to safeguard the financial system against big defaults.

Jae-Joon Lim, KRX’s director of business development in charge of OTC clearing, said in December the exchange would move to mandatory clearing after about six months.

South Korean Market Structure Update




Global Market Structure South Korea Newsletter Issue 24





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20112010 2012


Fig 1: Equities South Korean market monthly ADT (lit, auction & non-displayed order types)


Fig 3: Futures KFE KOSPI monthly ADT

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16South Korea Market Structure Monthly Newsletter

Changes to exchange fee schedule

Effective from 1st January, the fees for KRX have been adjusted as follows:

1.Trading and Clearing & Settlement

2. Processor User Fee


KOREA EXCHANGE FEE SCHEDULE (effective from January 1, 201 3)

1. Trading and Clearing & Settlement

Product

Type

For Trading

For Clearing & Settlement

Stock

DR 0.0022763% 0.0004446%

Stock Warrant Trading

ELW

ETF

0.0028454%

0.0004446 %

Government Bond Trading 0.0001094% 0.0000171%

Bond

Futures

Options

REPO

Bonds

KOSPI 200 futures

KOSTAR

KOSPI 200 Futures

(CME Night Market)

Single Stock 3-KTB, 5-KTB, 10-KTB

Lean Hog

Gold

Mini Gold

USD

JPY

EUR

KOSPI 200

Single Stock

USD

Final Settlement

Trading

Trading Final Settlement

Trading

Trading

Final Settlement



Trading

Final Settlement

Trading

Final Settlement

Trading

Final Settlement

Trading

Final Settlement

Trading

Final Settlement

Trading Exercise

Trading Exercise

Trading

Exercise

KRW2,560+

0.00001536% × period

0.0044787%

0.00021%

0.0002626%

0.0013132%

0.0001397%

0.0035891%

0.0005094%

0.0010188%

0.0005094%

0.0002 641%

0.0005283%

0.0002784%

0.000557%

0.0001894%

0.0003788%

0.010944%

0.010944%

0.010944%

0.0006604%

KRW400+

0.0000024% × period

0.0006998%

0.00004104%

0.00004104%

0.0002565%

0.0000273%

0.000701%

0.0000995%

0.000199%

0.0000995%

0.0000516%

0.000 1032%

0.0000544%

0.0001088%

0.000037%

0.000074%

0.00171%

0.00171%

0.00171%

0.0001032%

Type Maximum number of

Processors per member User fee

Basic

KOSPI Market 6 KRW 2,700,000 per

processor/per year KOSDAQ Market 6

Derivatives Market 8

Additional

KOSPI Market 40 KRW 24,200,000 per

processor/per year KOSDAQ Market 40

Derivatives Market 41

Treasury consults on license for trading platforms

In a paper titled ‘Australia’s Financial Market Licensing Regime: Addressing Market Evolution’, the Australian Treasury seeks to address the concerns felt by some in the market that platforms currently operating under an exemption from the Australian Market License (“AML”) regime do not offer investors the same level of protection as those that are registered, and that the increasing volume of trades being executed on such venues may increase the potential for suboptimal practices to occur. Some platforms may not be covered by the Market Integrity Rules (“MIR”) although firms controlling these platforms they would hold an Australian Financial Services License (“AFSL”).

There is recognition that both HFT and dark pools have a positive role to play in an efficient market structure but the question is whether the licensing regime should be updated given the current text was drafted before such practices were envisioned. HFT is stated to account for 20 – 30% of the trading on lit markets on a daily basis, with some days spiking above that level. The Treasury also confirms there are 17 entities operating numerous trading platforms that are exempted from the market license regime and 15 that operate crossing systems that are subject only to AFSL and MIR.

The Treasury also discusses international practices. Under MiFID II, the category of Organised Trading Facility has been introduced in addition to Multi-lateral Trading Facilities and Systematic Internalisers. The US has the ATS requirements. Feedback is sought on whether introducing a similar regime in Australia would aid such platforms to gain mutual recognition in overseas markets and so increase business.

Other key discussion points for consideration:

— Augmenting the Corporations Act to provide more flexibility, creating tailored licenses with very few exemptions or construct an alternative trading systems regime within the current legislation.

— With regard to HFT, whether non-market participants who gain access to venues through DMA should be directly subject to the Market Integrity Rules (“MIR”).

— Whether exemptions should apply on an operator level rather than a platform level. This would reduce the number of exemptions but would mean a repapering exercise with ASIC proposing to draft the new exemption documentation.

Any changes in legislation are likely to be put to the Parliament in the Winter 2013 session with implementation of change taking a minimum of a further six months.

Comments will be received until 1st February, the full paper can be found here:

http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2012/Australias%20Financial%20Market%20Regime%20Addressing%20Market%20Evolution/Key%20Documents/PDF/optionspaper.ashx

Australian Market Structure Update

Monthly ADT (Dec 2012) Total (AUD$) %loss/gain

Total market ADT AUD$3.23bn 8.61%

Lit ADT AUD$2.90bn 9.04%

Dark ADT AUD$0.15bn 17.21%

OTC ADT AUD$0.17bn 11.21% Source: Thomson Reuters, 2012


Global Market Structure Australian Newsletter Issue 24





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Fig 2: Equities Daily Turnover per venue - Dec 2012

Fig 3: Equities Daily % Order Type - Dec 2012 �

Fig 4: Equities Spreads (bps) - Dec 2012

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Treasury revisits ASIC cost recovery model

Due to the reshaping of the equity market structure regulation including the introduction of competition, ASIC has incurred substantial costs. The current cost recovery model came into force on 1st January 2012 and will expire on 30th June 2013, the costs to be recovered from the industry amount to AU$29.3 million. In the paper titled ‘Options for amending the ASIC Market Supervision Cost Recovery Arrangements’, the Treasury considers the following points:

— A move from a wholly variable charge to a quarterly fixed fee charge of AU$1800 to cover 50% of ASIC’s related costs. This would give the market more certainty as to the amount as it would not be effected by fluctuations in volumes. It would however mean that ASIC would need to perform retrospective true ups to account for any over/under charging – this is only to cover the costs of non issue specific general reviews of participants ie part of the costs of 20 Market and Participant Supervision staff.

— Whether there should be a market maker exemption given they are providing liquidity to the benefit of the broader market. If so, what obligations should apply.

— Whether to make it the passing on of costs mandatory from market participants to their underlying clients. Some have voiced concerns that if not made mandatory, some participants would absorb the cost themselves and so be able to price more competitively than those who pass costs on, and who themselves would then be at a disadvantage. The Treasury noted it has previously left the commercial decision of whether to pass on regulatory charge to firms.

— Charges after 1st July 2013 will also apply to the futures market. With the surveillance of the ASX24 moving from T+1 to real time, it is proposed that the charge would follow the equity model with a mix of fixed and variable charging, and an adjustment on a trade volume basis.

— What sanctions would be appropriate for non late payment of fees compliance, whether a pecuniary penalty would be appropriate.

Comments will be received until 1st February, the full paper can be found here:

http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2012/Amending%20the%20ASIC%20market%20supervision%20cost%20recovery%20arrangements/Key%20Documents/PDF/Discussion%20Paper.ashx

Irrespective of whether substantial change is implemented, a new Cost recovery Impact Statement (“CRIS”) and an update to the Fees Regulations is required by 1st July 2013. The market can expect to see a further consultation to be released early this year on those topics.

Buy side evaluate HFT and Dark Pools

The Financial Services Council (“FSC”) released a report titled ‘Buy Side Evaluation of HFT and Dark Trading “. The report found strong approval for increased competition and technology change although there were concerns regarding increased order flow fragmentation and predatory HFT.

Other key findings include:

— Approx 25% of trading in Australia is ‘HFT’ compared to 50% in the US— Most HFT is not predatory, a maximum 5% of HFT may be predatory— There is little evidence that Chi-X and the ALC have impacted trading

patterns— To date, ASIC’s proposals have been well reasoned and evidence

based — ‘Dark Trading’ levels have remained static over 10 years although there

are less blocks now— Calls for improvements in dark venue market structure— Suggestions that a message tax be introduced for those with very high

order-to-trade ratios

To see the report click here:

http://www.fsc.org.au/downloads/uploaded/Changing%20Technology%20in%20Capital%20Markets_2182.pdf

Relief for funds from PDS requirements extended to 2014

Superannuation funds, hedge funds and multi- funds will now be able to continue to submit the short form of the Produce Disclosure Statement until 22nd June 2014 as ASIC granted relief pending a Government decision on the point.

Personnel Moves

Peter Fowler to leave Chi-X Australia in 2013; Jamie Crank joins

The CEO of the alternate trading venue Chi-X Australia is going to step down from his role in 2013 after years with the firm. Fowler said in a public statement

“ While appreciating that adapting to significant market structure changes such as the ones we’ve seen in Australia is not without its challenges, I believe it is important that the Australian market continues to innovate, improve and, where appropriate, reform.”

Taking the role of Head of Market Operations, Jamie Crank joins from the London Stock Exchange, where he was most recently Head of Commercial Management, Equity & Derivatives Markets.

Australian Market Structure Monthly Newsletter





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Fig 5: Equities Volatility - December 2012

Fig 6: Futures SFE-ASX SPI 200 monthly ADT

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19Australian Market Structure Monthly Newsletter

Venue news

Chi-X Australia hits double figures market share; may begin derivatives trading

Shortly after celebrating its first birthday, Chi-X Australia attained a market share of 12.4% (trade date 22nd November). 16.93% of trades executed at a price better than that seen on the ASX with an average improvement of 20.14bps meaning a total of AU$3.31 million was saved.

It has also been reported that the venue may start to trade derivatives. The question of whether competition will be permitted for cash equities in the clearing space is due to be answered shortly at which point trading derivatives may become an attractive proposition for Chi-X. The London Clearing House has already announced that it will be competing with the ASX by providing a facility for clearing interest rate swaps.

The competition has not been so good for the ASX with a drop of 7% being recorded for their equity trading division for 2012. Given equities only makes up a marginal amount of the revenues generated by the ASX facing competition on both the clearing and the derivatives trading fronts would considerably heighten the pressure.

Hoax causes Whitehaven Coal stock to lose 9%

On 7th January, environmentalist Jonathan Moylan temporarily wiped AU$314 million from the value of the Australian resources stock by causing some traders and media into thinking the company had been stripped of a $1.2 billion loan promised by ANZ Bank. The Canberra Times has estimated that the real loss to investors was AU$450,360.

Some feel that market rules, specifically the continuous disclosure rules, have encouraged the media to go ‘fishing’ in order to find out what the real story. Others have speculated that market participants may be using the media. Kevin Lewis, the Chief Compliance Officer at the ASX stated:

‘’ There is also a concern that people are misusing media connections and leaking information deliberately to embarrass companies into making disclosures,’’ Mr Lewis said.

The ASX rules regulating the cancellation of trades have also come into focus as the ASX stated that they did not allow for this set of circumstances. A spokeswoman for the exchange said trading in Whitehaven was ‘’within ASX’s prescribed no-cancellation range. Subsequently, ASX has received no requests for cancellation from ASX market participants’’ although it would seem from local press that a number of traders would have expected trades to be cancelled.

ASX updates fee schedule

In a 35 page document, the ASX have updated their fee schedule that covers a range of charges from market data to clearing services, for hosting services through to technical support. The up to date fee schedule can be accessed here:

https://www.asxonline.com/intradoc-cgi/groups/participant_services/documents/information/asx_016046.pdf

Changes have also been made to the fees for the Centre Point block crossing order type. As announced on 13th December, the tiered fee structure previously advised in ASX Circular 184/12 will be replaced with a flat 0.50bps trade fee for Centre Point Block orders of all sizes. The pricing for normal Centre Point orders and Sweep orders matching with Centre Point remains unchanged at 0.50bps.

For the full notice see here:

https://www.asxonline.com/intradoc-cgi/groups/participant_services/documents/communications/asx_035669.pdf

Intra-day auction to be trialed for non ASX300 stocks

On 29th January, the ASX will start intra-day auctions for stocks outside the ASX300 for five minutes at 12pm and 2pm for around 15 seconds. The trial will run for 3 months.

Sources www.treasury.gov.au

www.asic.gov.au

www.theaustralian.com.au

www.moneymanagement.com.au

www.investordaily.com.au

www.ft.com

www.smh.com.au

www.canberratimes.com.au

Singapore passes amendments to Securities and Futures Act for OTC derivatives; MAS consults on supporting amendments

The Singapore parliament passed the amendments to the Securities and Futures Act seeking to regulate over-the-counter or OTC derivatives and to strengthen safeguards for retail investors. The investors suffering a loss as a result of false or misleading statements can now obtain compensation. The Monetary Authority of Singapore’s (“MAS”) power to revoke licenses, enter and search premises, and impose prohibition orders is also extended. The policy proposals for regulation of OTC derivatives include:

— Introducing a new regulatory regime for trade repositories

— Extending the regulatory regime for clearing facilities to OTC derivatives

— Mandating reporting and clearing of certain OTC derivatives transactions

MAS is now consulting on draft Regulations in support of amendments contained in the SF(A) Act 2012 relating to the new Part IIA and Part III of the Securities and Futures Act (Cap. 289) (“SFA”). The draft regulations proposed for consultation include:

— The Securities and Futures (Trade Repositories) Regulations 2013 (“SF(TR)R”) (at Annex 1) will operationalise the new Part IIA of the SFA, which provides for the regulation of licensed trade repositories (“LTR”) and licensed foreign trade repositories (“LFTR”). The SF(TR)R sets out requirements on the admission of trade repositories as LTRs or LFTRs, as well as the ongoing requirements on LTRs and LFTRs.

— The Securities and Futures (Clearing Facilities) Regulations 2013 (“SF(CF)R”) (which will repeal and replace the Securities and Futures (Clearing Facilities) Regulations 2005) (at Annex 2) will operationalise the new Part III of the SFA, which provides for the regulation of approved clearing houses (“ACH”) and recognised clearing houses (“RCH”). Similar to the SF(TR)R, the SF(CF)R sets out requirements on the admission of persons operating clearing facilities as ACHs or RCHs, as well as the ongoing requirements on ACHs and RCHs.

— The Securities and Futures (Clearing Facilities) (Transitional and Savings Provisions) Regulations 2013 (at Annex 3) which provides for the transition of existing persons operating clearing facilities to the new regulatory regime.

The consultation paper can be accessed here:

http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/MAS%20CP%20for%20SFTRR%20SFCFR%20and%20SFCFTransitionR.pdf

The draft regulations can be accessed here –

http://www.mas.gov.sg/News-and-Publications/Consultation-Paper/2013/Consultation-Paper-on-Draft-Regulations-for-Trade-Repositories-and-Clearing-Facilities.aspx

MAS to undergo financial stability assessment

The MAS has announced that it will participate in the International Monetary Fund’s Financial Sector Assessment Programme (“FSAP”) in 2013. The FSAP is a comprehensive and in-depth external assessment of a country’s financial sector. The assessment contributes to a deeper understanding of the stability and resilience of the financial sector.

The FSAP mission is expected to visit Singapore in April and May 2013 for the standards and financial stability assessments. Singapore last participated in the programme in 2004.

ASEAN Market Structure Update




Global Market Structure ASEAN Newsletter Issue 24






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Fig 2: Equities Daily % order type - December 2012

Fig 3: Futures SGX MSCI Singapore monthly ADT

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21ASEAN Market Structure Monthly Newsletter

SC Malaysia and SFC Hong Kong jointly launch e-forum for Takeovers Regulators

The Securities Commission Malaysia (SC) and Securities and Futures Commission (SFC) Hong Kong have jointly launched an online forum (the Asia Pacific Takeovers Regulators Forum) to facilitate the exchange of ideas, views and resources on takeovers and related matters among regional experts in takeovers regulation. The forum’s membership is open to takeovers regulators only. The forum will help regulators across the region to

— promote and develop the transparent and fair conduct of takeovers activities in their own markets

— learn from the experience of others to assist in the development of regulation in their countries

— protect the public in their countries against financial losses arising from malpractice in takeovers

ASEAN Exchanges holds a regional road show

The ASEAN Exchanges group, which is composed of the bourses from six regional countries, are holding a road show called “Invest ASEAN 2013” in multiple countries in the region to promote the top 30 stocks from each location (also called as ASEAN Stars) as a “highly investable” asset class through the recently launched “ASEAN Trading Link”. The Link connects three of the markets – Singapore, Malaysia and Thailand – with Indonesia, the Philippines and Vietnam working towards connecting in the future. Rather than being a single venue, the Link allows for an introducing broker model with vertical clearing and settlement in the country of execution.

The roadshow started in Bangkok on 12th January, will move to Singapore on 2nd February and Kuala Lumpur on 2nd March.

SC Malaysia tweaks Capital Market laws to create Business Trusts

The Securities Commission Malaysia (“SC”) released the Capital Markets and Services (Amendment) Act 2012 (CMSA 2012) detailing a new product referred to as a Business Trust. Guidelines were also released to encourage market and product innovation, promote market efficiency, and allow more informed investment decisions.

Business trusts are created when a company segregates some of its assets and appoints an entity to act as both trustee and manager of the assets. The trustee-manager, which then legally owns those assets, manages them for the benefit of unitholders looking to benefit from any yield generated. In Malaysia, it is anticipated that infrastructure companies, independent power producers and telecommunications companies will be most likely to set up business trusts. Business trusts will be introduced over two phases, the first phase requiring the trusts to be listed and having a market capitalisation of RM1 billion. The later phase will allow for foreign and unlisted offerings.

A new approval framework was also introduced with a clear distinction between listed and unlisted products. The regulation of sales and marketing products was also updated in the Guidelines on Sales Practices of Unlisted Capital Market Products (Sales Practices Guidelines). The Guidelines have been introduced to promote responsible conduct in their development and sale including a requirement to provide Product Highlights Sheet to the investors at Point of Sale. In the event of mis-selling, a Capital Market Compensation Fund has been provided for.

Personnel Moves

Head of Operations leaves SGX

Benjamin Foo has decided to leave SGX after over 12 years with the exchange. Foo was made Head of Operations in 2009 and at the time of resigning held a number of senior positions including Head of AsiaClear, the OTC derivative CCP.

Venue News

SGX provides market access linkage with Eurex; expands NYSE Technologies’ SFTI

The Singapore Exchange (“SGX”) and Eurex started providing integrated market access to their customers with their data center linkage beginning January 2013. With the link now operational, customers of each exchange can access both markets by connecting their trading systems to either the SGX or Eurex and Deutsche Börse co-location data centers. Trade matching will still be executed at the respective home exchanges.

SGX has also enabled the expansion of NYSE Technologies’ Secure Financial Transaction Infrastructure (“SFTI”) in Asia allowing the co-location customers at the Singapore Exchange to trade in multiple Asian markets through one single point of access. Through SFTI in Asia, customers in SGX Co-location can also trade on NYSE Liffe, the European-based derivatives exchange of NYSE Euronext, through the same infrastructure.

SGX derivatives volumes hit all time high in 2012; might introduce SS Options in 2 years

The derivatives volume on SGX in 2012 reached a new high of 80.2 million contracts, up 11% YoY. The daily average volume also grew 11% to a new high of 326,595 contracts. Open interest also reached a new high of 2.95 million contracts on 13th December.

The SGX is hoping to introduce Single-Stock Options within the next 18 months now its infrastructure upgrade is complete. SGX has also applied and is awaiting recognition from the US Commodities and Futures Trading Commission (“CFTC”) as derivatives clearing organisation. As the US regulations now require that trades be cleared through a recognised clearing facility, it is important to the Singaporean iron derivatives market that the status be attained.

Singapore equities meanwhile also ended 2012 on a high with the STI registering a growth of 20% YoY although turnover was declined 12% through the year.

SGX expands clearing capabilities for OTC customers

SGX’s international customers will have a choice of clearing OTC transactions as either swaps or futures contracts from 25th February 2013. SGX AsiaClear will offer a suite of futures contracts called AsiaClear Futures which will be fully fungible with bilateral swaps currently cleared by the exchange allowing international customers, including U.S. customers, to meet their risk management needs with swaps and/or futures in SGX AsiaClear.

SGX AsiaClear intends to expand its clearing services from the current commodity and financial products to Asian OTC equity derivatives as customer needs develop. Mr. Michael Syn, Head of Derivatives at SGX said

“ We are committed to helping our customers throughout Asia, Europe and the U.S. navigate the complexity of rapidly evolving risk management and regulatory requirements. Customers using our unique SGX AsiaClear service are free to choose transaction modes which best fit their needs while clearing through a single venue.”

SGX to publish daily short-selling volumes

SGX has announced that it will start publishing daily reports of short-selling activity (total value and volume) for all counters starting March 2013 to boost risk management and increase market transparency.

Philippines ends 2012 with a blast; surges to an all-time high with continued fireworks

Philippine stocks scaled greater heights for the fourth straight year in 2012, rising by 33% for the year on the back of favorable local

22ASEAN Market Structure Monthly Newsletter

macroeconomic and corporate performance. The Philippine Stock Exchange index closed at 5,812.73 points on the last trading day of the year breaching the record high level a total of 38 times during the year.

The trend seems to be continuing into 2013 with the PSE index breaching 6100 levels in intraday trade on 14th January. The bourse also doubled its profits in the first nine months compared to last year to P484.95 million primarily due to higher listing revenues.

Philippines to launch ETFs

The Philippine Stock Exchange (“PSE”) aims to launch ETFs in the local markets by Q1 2013. The Securities and Exchange Commission has recently approved the regulatory framework for the offering of ETFs under which

— The ETF applying to list on PSE should have a minimum paid-up capital of at least P250 million

— The ETF can offer its securities after successful registration and approval from PSE

— The securities tracked by the ETF should be listed and traded on a registered exchange and have adequate liquidity

— Liquidity criteria and methodology used by ETF should be disclosed in the prospectus

— ETFs to maintain the minimum public float requirements of 10%— ETFs to have an investor relations office to manage its investor relations

program

In another move, PSE has notified that the shares of companies failing to adhere to the minimum public float requirements by 31st December would be suspended from trading on exchanges and would therefore attract 5 to 10% capital gains taxes applicable on off-market deals. PSE might extend the deadline for certain companies on a case-to-case basis as well.

IDX plans to have 30 new listings this year; aims to increase market cap to $750 bn by 2015

Indonesia Stock Exchange (“IDX”) expects to list 30 new companies on its platform in 2013. Five companies have already announced plans to list in IDX in Jan 2013 including shipping firm PT Pelayaran Nasional Bina Buana Raya, Bank Maspion Indonesia, hotel operator Saraswati Griya Lestari, oil palm plantation firm Mitra Agro and hospital operator Sarana Meditama Metropolitan. They are expected to cumulatively raise $90.9 mn. IDX also aims to grow its market capitalisation to $750 bn by 2015.

According to the IDX president director, Ito Warsito such growth in market capitalisation would be attainable as more companies, were beginning to consider listing their shares on IDX. Ito added that the IDX was looking forward to the participation of larger institutions such as multinationals operating in the country.

Bursa Malaysia reaches all time high in 2012, expects to continue IPO momentum

Bursa Malaysia ended the year on a positive note with FTSE Bursa Malaysia KLCI closing at an all-time high level of 1688.95 points gaining 10.34% over the last year’s close.

Bursa Malaysia has also said that it expects to match the amount of funds raised through IPOs last year (RM22.9 bn) in 2013. The last year’s performance was driven by 3 mega IPOs (Felda GV, IHH Healthcare and Astro), and while this year’s pipeline does not currently have any big names included, it is still impressive. Bursa Malaysia was the world’s third largest initial public offering venue last year.

“ The pipeline is strong. It may not be world top IPOs but you can see the capital market is growing strongly as companies grow and benefit from the Government’s programmes and initiatives” Datuk Tajuddin Atan, CEO Bursa Malaysia said.

Bursa Malaysia amends listing requirements, signs MoU with Shanghai Stock Exchange

Bursa Malaysia amended the Main Market and ACE Market Listing Requirements to strengthen and enhance corporate governance practices of listed issuers. The major amendments include:

— Aligning disclosure of corporate governance statements with the Malaysian Code on Corporate Governance (MCCG) 2012 in annual reports

— Mandating poll voting for related party transactions which require specific shareholder approval

— Limiting the number of directorships in listed issuers from 10 to five— Establishment of a nominating committee and requiring disclosure of its

activities— Enhancing disclosures in annual reports in relation to directors’ training

Bursa Malaysia has also signed a MoU with the Shanghai Stock Exchange to further deepen the relations and open and develop more communication channels between the two regional bourses. The MoU states that further cooperation will cover aspects such as structuring of listed products, development of debt securities products and debt trading facilities, corporate governance, exchange or secondment of staff and research projects.

Bursa Malaysia Derivatives eases restrictions for trading participants

Bursa Malaysia Derivatives has announced that the Futures brokers will now be able to open branches and/or kiosks across the country to extend derivatives trading facility to the retail investors. Brokers with a minimum paid-up capital of 10 million ringgit will be allowed to open a combination of up to ten branches and/or kiosks (with a maximum of five branches) per year in the first and second year of operations while no limits will be applied third year onwards.

Bursa Malaysia beefs up surveillance; selects X-Stream INET for its new trading platform

Bursa Malaysia announced that effective 31st December 2012; it has implemented Millennium SurveillanceTM System as its new market surveillance infrastructure for its Equities and Derivatives markets. The new system allows for the identification of trading patterns at various levels across an exchange’s participant base, from brokers to individual investors, and includes market replay functionality for forensic analyses of events allowing each transaction and its effects on the market to be closely reviewed.

Bursa also announced that it has selected NASDAQ OMX to upgrade its securities market trading platforms through the industry leading technology by NASDAQ OMX, X-Stream INET. The new platform will be used for trading of equities, fixed income, exchange traded funds and issue warrants for the local stock exchange.

Thai markets outperform in 2012; to get an SME board in 2013

The Stock Exchange of Thailand (“SET”) witnessed a spectacular performance in 2012, driven by the strong domestic economy and huge foreign fund inflows. The index ended the year at a 16 year high of 1,391.93 points. The Market capitalisation was up 41% YoY.

The SEC plans to introduce an SME Venue next year as a trading board for SMEs, which are still under the listing criteria of the SET and the Market for Alternative Investment (MAI). The SME Venue is proposed to be a special board allowing only accredited or institutional investors to trade, as the assets are unique and require deep analysis.

Sourceswww.channelnewsasia.comwww.sgx.comwww.mas.orgwww.reuters.comwww.4-traders.comwww.bangkokpost.comwww.todayonline.com

www.online.wsj.comwww.thejakartagloble.comwww.en.acnnewswire.comwww.ft.comwww.biz.thestar.com.mywww.bworldonline.comwww.nationmultimedia.com

www.philstar.comwww.waterstechnology.comwww.btimes.comwww.finextra.comwww.gowealthy.com


Global Market Structure APAC Quant Analysis Factsheet - Dec 2012

Below is a selection of quantitative metrics, which provides additional analysis of the markets and liquidity during December 2012. For further information, please contact:

Global Market Structure:email: [email protected]: +44 207 547 4390

MSCI Asia Pacific Ex JP

Taiwan TAIEX Index

FTSE Straits Time Index

NSE S&P CNX Nifty

Hang Seng Composite Index

S&P/ASX 200 Index

Korea SE Kospi 200 Index

Sp

read

(bp

s)

33.0

28.0

3.0

18.0

8.0

13.0

23.0

Vo

lati

lity


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


15.0

13.0

9.0

5.0

7.0

11.0

17.0

19.0

Intr

a-In

dex

Co

rrel

atio

n

36.0%

6.0%

11.0%

16.0%

21.0%

31.0%

26.0%

41.0%

46.0%


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

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17-D

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ec

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ec

11-D

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31-D

ec

03-D

ec

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ec

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ec

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ec

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ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

Liquidity

Historical Volatility

The chart below shows the daily index primary spreads on APAC indices during December 2012:

The chart below shows primary volatility of APAC indices during December 2012:


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


Sp

read

(bp

s)

33.0

28.0

3.0

18.0

8.0

13.0

23.0

Vo

lati

lity


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


15.0

13.0

9.0

5.0

7.0

11.0

17.0

19.0

Intr

a-In

dex

Co

rrel

atio

n

36.0%

6.0%

11.0%

16.0%

21.0%

31.0%

26.0%

41.0%

46.0%


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

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25-D

ec

26-D

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ec

28-D

ec

31-D

ec

03-D

ec

04-D

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05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

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12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

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19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

Sources:Deutsche Bank AG estimates and calculations


Quantitative Analysis:email: [email protected]: +44 207 545 3129

24Quant Factsheet Monthly Newsletter

Sector Correlation Matrix

Au

to &

Par

ts

Ban

ks

Bas

ic

Res

.

Ch

emic

al

Co

nst

. &

M

at.

Fin

anci

al

Ser

v.

Foo

d &

B

ev.

Ind

. G

ds

& S

erv.

Med

ia

Oil

& G

as

Per

s.

Go

od

s

Rea

l E

stat

e

Ret

ail

Tech

.

Tele

com

s

Trav

el &

Le

is.

Uti

litie

s

Auto. & Parts

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

1M Historical Correlations80-100% 60-80% 25-60% <25%


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


Sp

read

(bp

s)

33.0

28.0

3.0

18.0

8.0

13.0

23.0

Vo

lati

lity


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


15.0

13.0

9.0

5.0

7.0

11.0

17.0

19.0

Intr

a-In

dex

Co

rrel

atio

n

36.0%

6.0%

11.0%

16.0%

21.0%

31.0%

26.0%

41.0%

46.0%


Taiwan TAIEX Index


NSE S&P CNX Nifty


S&P/ASX 200 Index


03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

03-D

ec

04-D

ec

05-D

ec

06-D

ec

07-D

ec

10-D

ec

11-D

ec

12-D

ec

13-D

ec

14-D

ec

17-D

ec

18-D

ec

19-D

ec

20-D

ec

21-D

ec

24-D

ec

25-D

ec

26-D

ec

27-D

ec

28-D

ec

31-D

ec

Intra-Index Correlation

The chart below shows the correlation of movement within each index, calculated using the index and index constituents volatilities and weights:

The matrix below shows the % correlation of movement between two sectors during the previous month:



100.0% 66.5% 64.3% 76.2%7 0.1% 58.8%4 6.2% 56.2% 47.9% 58.7% 61.4% 57.7% 61.0% 48.4% 57.8%3 7.8%66.5% ##### 81.8% 47.0% 78.5% 85.8% 56.5% 53.7% 51.2% 83.9% 70.9% 84.6% 55.7% 58.8% 54.5% 62.2% 53.6%64.3% 81.8% ##### 59.7% 77.3% 80.1% 44.7% 48.5% 54.2% 76.9% 76.1% 77.3% 74.5% 47.7% 36.7% 58.1%4 9.6%76.2% 47.0% 59.7% ##### 60.5% 48.2%4 1.2% 52.9% 55.3% 50.9% 50.0% 43.5% 60.9% 58.5% 28.0% 56.4%70.1% 78.5% 77.3% 60.5% ##### 66.7% 46.1% 43.4% 38.9% 79.2% 72.1% 74.5% 51.5% 54.6% 38.9% 46.6%4 4.5%58.8% 85.8% 80.1% 48.2% 66.7% ##### 52.5% 46.9% 57.6% 69.8% 56.2% 76.7% 55.3% 49.0% 39.3% 53.4%4 2.9%46.2% 56.5% 44.7% 41.2%4 6.1% 52.5% ##### 39.4% 31.3% 44.3% 53.3% 46.4% 26.8% 41.6% 50.2% 42.8%3 4.3%56.2% 53.7% 48.5% 52.9%4 3.4% 46.9%3 9.4% ##### 68.2% 55.6% 43.9% 47.6% 39.0% 70.3% 37.1%3 6.2%47.9% 51.2% 54.2% 55.3%3 8.9% 57.6%3 1.3% 68.2% ##### 40.9% 37.2% 46.9% 49.1% 55.6% 41.0%2 6.1%58.7% 83.9% 76.9% 50.9% 79.2%6 9.8% 44.3% 55.6% 40.9% ##### 64.8% 80.2% 43.7% 57.0% 57.0% 48.5%5 3.9%61.4% 70.9% 76.1% 50.0% 72.1% 56.2%5 3.3% 43.9% 37.2% 64.8% ##### 73.5% 62.2% 48.9% 36.2% 49.8% 61.8%57.7% 84.6% 77.3% 43.5% 74.5%7 6.7% 46.4% 47.6% 46.9% 80.2% 73.5% ##### 58.0% 57.0% 48.6% 54.1%5 6.5%61.0% 55.7% 74.5% 60.9% 51.5%5 5.3% 26.8% 39.0% 49.1% 43.7% 62.2% 58.0% ##### 39.8% 50.2%3 9.3%48.4% 58.8% 47.7% 58.5%5 4.6% 49.0%4 1.6% 70.3% 55.6% 57.0% 48.9% 57.0% 39.8% ##### 33.8% 46.2%

54.5% 36.7% 28.0%3 8.9% 39.3%5 0.2% 57.0% 36.2% 48.6% 33.8% ##### 37.2%57.8% 62.2% 58.1% 56.4%4 6.6% 53.4%4 2.8% 37.1% 41.0% 48.5% 49.8% 54.1% 50.2% 46.2% ##### 31.5%37.8% 53.6% 49.6% 44.5%4 2.9% 34.3% 36.2% 26.1% 53.9% 61.8% 56.5% 39.3% 37.2% 31.5% #####

25

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