FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

March 12, 2010 • 11:24 am 0

China: Governor of the Shanghai Stock Exchange (SSE) Geng corrects three Misunderstandings on International Board

Geng Liang, member of the CPPCC National Committee and Governor of the Shanghai Stock Exchange (SSE), clarified ambiguous and incorrect assumptions in development of International Board in Beijing yesterday.

According to Geng, the introduction of International Board would benefit both the development of domestic capital market and the building of Shanghai into an international financial hub and would by no means reduce itself into a global ATM machine as some concerned.

Three Major Positive Effects of Int’l Board

“The decision of listing eligible overseas companies on domestic market, or introducing International Board, is made based on the consensuses reached through the Sino-US strategic economic dialogues and Sino-UK economic and trade dialogues. For China’s capital market, the launch of International Board will bring about benefits in three aspects,” said Geng. First of all, the launch of International Board, a milestone in China’s opening-up of its capital market, offers domestic investors a new channel to purchase shares of large overseas companies with RMB, which is by all means a progress.

Relevant insiders also hold that the opening of International Board is especially conducive to the investment in overseas enterprises by investors who are inexperienced in overseas investment and unfamiliar with foreign law and accounting systems.

Besides, the development of International Board will exert positive influence on the construction of blue-chip market, thus promoting the growth of China’s capital market. “The ultimate goal of the SSE is to build a blue-chip market, which includes high-quality Chinese and foreign listed companies,” added Geng.

Finally, International Board means a lot to building Shanghai into a global financial center. “The listing of overseas companies on domestic market will help pool human resources, capital and institutions to Shanghai,” noted Geng.

No Possibility for “Int’l ATM machine”

As to the concern about misusing International Board as “a global ATM machine”, Geng explained that under the arrangement that free exchange is forbidden under the RMB capital account, the A shares on the future International Board can’t be exchanged freely with the shares issued overseas. Thus, there is no possibility for “a global ATM machine”. Furthermore, “the large international companies, who apply for going listed on the SSE, have already got listed on overseas stock exchanges. Their listing on Chinese market is actually a behavior of refinancing. According to internationally accepted practices, the prices for refinancing generally shouldn’t exceed those on local secondary market.” Therefore, it is not qualified to be “a withdrawing behavior” in terms of scale.

Geng also stated that the launch of International Board would not impact Hong Kong’s position as an international financial center. “The support to Hong Kong market instead of affecting its construction of international financial hub by the return of H shares to A shares is a case in point. During the 20 years’ development of China’s capital market, 60 domestic enterprises went listed in Hong Kong, which vividly proved that the development of domestic capital market boosted Hong Kong market and exchange.”

Substantial Benefits of Int’l Board

Insiders hold that the benefits of initiating International Board are substantial. Apart from those mentioned by Geng, there are at least five more major benefits.

First, the new board will relieve the pressure from foreign exchange reserve, which accords with the development transition of national economy from capital attraction to technical, managerial and human resources introduction. Second, the new board will attract overseas natural resources and energy enterprises to get listed in China, thus helping break their capital barrier towards China’s capital by counteracting the increase in international commodity prices with equity income. Third, the new board provides a channel for Chinese investors to share the income from business conducted by multinational companies in China while changing the situation that multinational companies can only offer job opportunities to Chinese. Fourth, the corporate governance of domestic listed companies will be improved thanks to the model effect of overseas companies listed in China. Last but not least, the new board will help multinational companies integrate themselves with China’ economy to make greater contribution to the development of China’s economy.

Source: MondoVisione, 11.03.2010

Filed under: China, Exchanges, News , , , , , , ,

March 11, 2010 • 7:06 am 0

China’s QDII ETFs … taken with a pinch of salt

Despite the fanfare from QDII ETF issuers and the Shanghai Stock Exchange, these products are unlikely to achieve the lofty aims set for them.

If Shanghai Stock Exchange’s general manager, Zhang Yujun, is to be believed, China’s new generation of exchange-traded funds under the qualified domestic institutional investor (QDII) scheme will be ready for launch shortly.

The Shanghai bourse is keen to put its hotly anticipated products onto the market as soon as possible. It has marked 2010 down as a year of innovation, with the number of domestic and overseas ETF launches potentially hitting 10 for this year.

But it’s not the domestic ETFs that industry execs in Shanghai or around the region are buzzing about, but the overseas ETFs the SSE is championing. Market players are wondering what the developments will mean for the QDII market and what China’s fund flows in the region will look like after these products are made available.

The names now lining up in the QDII ETF pipeline include: China Southern, with its planned launch of a S&P 500 tracker; Beijing-based China Asset Management, which is going with Hong Kong’s Hang Seng Index; Harvest Fund Management, the new proud owner of Deutsche Asset Management’s Asian investment platform, using the Dow Jones Industrial Average; Shanghai’s Fortune SGAM, which will soon see its foreign stake transferred to Société Générale’s alternatives arm, Lyxor, and whose ETF tracks the Topix Core 30; not to mention Huaan’s newly announced initiative to track the FTSE 100.

In one fell swoop, the SSE is making available assets from around the world. Investors in China, at the click of a trade, will be able to access asset classes from US and UK equities to regional Asian exposures and Hong Kong and Japanese stocks.

(The list above does not cover Guotai Fund Management, one of the earliest Chinese houses wanting to license an index for an overseas ETF, which recently realised it will not attract enough liquidity for a niche index such as the Nasdaq 100. It is now quietly calling its product an “index-tracking fund”, instead of an ETF. Nor does the list include Penghua Fund, whose high-profile announcement of its supposed deal to have contracted three MSCI Barra indices was never confirmed by MSCI.)

Zhang says the Shanghai bourse wants to play its part in ’standardising’ asset management. Index-based products are easily understood by investors, and through the standardisation process, the SSE believes it will bring transparency and even discourage moral hazards among asset managers.

Better yet, since trading and management fees for ETF instruments are traditionally the lowest for products globally, the introduction of ETF competition into the Chinese market should help bring down the high fees usually seen in the active management sector. And the way Zhang sees it, passive and index-based investments will eventually outperform.

Yet all these laudable ambitions should be taken with a pinch of salt. Far from having developed ETFs that come up to expectations, the SSE’s versions of these products and the underlying mechanism are hardly on a par with developed-market ETFs.

In particular, sources say the SSE boss’s comments are meant for domestic consumption — the exchange has been publicly pressuring the China Securities Regulatory Commission (CSRC) into approving the ETF launches, which were planned to have happened as early as November last year.

Why the regulatory hesitation? The CSRC was an early champion of introducing more liquid and transparent ETFs to China. But the SSE has not resolved the multiple technical barriers limiting the listing of an efficient overseas product in the country, as is revealed by an early blueprint for the Harvest Dow tracker jointly designed by Harvest and the SSE, and made public by the exchange. The SSE has made compromises in the design and the trading mechanisms of these supposed ETFs.

Amid the fanfare created by the issuing fund houses and even the SSE itself, one key point appears to be overlooked. The unspoken truth is that since the bourse has failed to tackle the underlying issues, the planned ETFs could only trade on exchanges as closed-end funds and would largely fail to deliver the many benefits normally expected of genuine ETFs.

These products will face challenges from day one, including: time differences in settlement cycles between the SSE and the exchange of the underlying index’s traded market; the lag in trading hours between China and underlying securities; the limitations of China’s lack of market-making mechanisms, and its reliance on its unique arbitrage mechanisms for levelling ETF traded prices and net asset values; and China’s foreign exchange restrictions, which currently only allow for monthly repatriation of capital. All of which the SSE has acknowledged in its white paper on ETFs that is available to the public.

Bound by these limitations, these products will not be able, for example, to perform continuous creation of units like normal ETFs, unlike even the very same strategies traded in Hong Kong. The NAVs will be largely static during the trading hours in China, though the ETF prices will be subject to supply-demand swings. (Hong Kong’s platform is backed by market-makers, unlike Shanghai’s, which is highly sensitive to liquidity and the level of trading among arbitrageurs on underlying strategies.)

The question then becomes: will China ever attract enough interest among arbitrageurs to trade on these faraway markets without real-time information? After all, when China trades, the US and the UK markets will be largely closed. Even for markets that sit in Asian time zones and close at hours overlapping China’s, there will be time differences on the settlement cycles. Arbitrageurs, therefore, will have to trade by assuming and incurring all risks themselves.

For example, a Ping An Hong Kong subsidiary doesn’t trade on the books of Ping An’s mainland entity. Legal status still withstanding, they are very different entities. One unit south of the border going short, cannot be reconciled from an accounting perspective by a separate unit going long north of the border. So, from where and how will these arbitrageurs emerge?

Because of the many compromises the Shanghai bourse has made to fit QDII ETFs into the existing — but highly unique — domestic ETF mechanism, the forthcoming international instruments can largely only be ETFs in name but not substance. An even better way to understand them is actually to see them as the equivalent of ‘listed open funds’ or ‘Lofs’ — products peculiar to China.

Ultimately, QDII ETFs are no different from closed-end funds — so why the current fuss over them? Sources close to the Shanghai bourse’s advisory panel say there’s really no reason for it — they are just another group of products to add to China’s well stocked shelf.

Nonetheless, they offer a slightly better alternative to the many internally managed and largely cost-return-inefficient QDII active funds now available in the market. And the idea of ETFs from a marketing perspective will no doubt catch on.

But even the mere illusion of innovation in the QDII market may be a false dawn. Both active and passive QDII managers will continue to be plagued by domestic expectations of further renminbi appreciation and by the bad reputation of the first generation of QDII products still freshly and firmly fixed in the minds of Chinese investors.

To wit, E-fund — the second biggest Chinese fund house, no less — kicked off the year with a fundraising attempt of just $86.6 million for its first QDII product.

Source: AsianInvestors.net, 10.03.2010 by Liz Mak

Filed under: Asia, China, Exchanges, Hong Kong, Japan, News , , , , , , , , ,

March 9, 2010 • 7:43 am 0

CME Group, Bolsa Mexicana de Valores and MexDer Announce Order Routing, Equity Agreement

In connection with yesterday’s announcement made by CME Group concerning the order routing agreement it has entered into with the Mexican Stock Market (BMV) and the 1.9 percent acquisition of BMV’s capital, BM&FBOVESPA and CME Group announce that they will initiate discussions about said transaction and other commercial opportunities with BMV, in consonance with the terms of the global strategic partnership published in the material fact dated February 11, 2010.

Source: MondoVisione, 09.03.2010

CME Group, the world’s leading and most diverse derivatives marketplace, and the Bolsa Mexicana de Valores, S.A.B. de C.V. (BMV), the financial exchange operator in Mexico, today announced that they have entered into a strategic partnership that includes an order routing agreement for derivatives products. CME Group has purchased shares in the Mexican exchange valued at $17 million, or approximately 1.9 percent of outstanding BMV shares, as part of the equity portion of the agreement. Additionally, the Control Trust of BMV has granted CME Group the right to nominate a member to BMV Board of Directors and the two exchange operators have signed a memorandum of understanding covering activities aimed at enhancing the partnership between the two exchanges.

Mexico’s MexDer seeks high class global partners, 08.11.2009

BMV Bolsa Mexicana de Valore: Information on relationships and discussions with CME, 27.09.2009

Through the agreement, CME Group will become the exclusive exchange provider of derivatives order routing services to BMV outside Latin America, and BMV will be the exclusive exchange provider of derivatives order routing services to CME Group in Mexico. BMV’s derivative products are offered through its derivatives subsidiary, MexDer.

CME Group and BMV have also agreed to pursue potential joint initiatives including product development, marketing and customer education as well as clearing opportunities. Additionally, BMV, CME Group and its Global Preferred Strategic Partner BM&FBOVESPA will initiate discussions about the aforementioned transaction and other commercial opportunities.

“Latin America is a key market for CME Group,” said Terry Duffy, CME Group Executive Chairman. “We are pleased to announce this new partnership with BMV which furthers our global strategy to offer customers increased access to our products while, at the same time, allowing BMV to use the CME Globex trading network to increase distribution of their products in North America.”

“With Mexico’s standing as the 13th largest economy and one of our country’s most significant trading partners, we are pleased to work with BMV to facilitate global hedging and risk management activity in our respective markets,” said Craig Donohue, CME Group Chief Executive Officer. “In addition to providing CME Group customers with our own highly liquid products in interest rates, equities, foreign exchange, commodities, energy and metals, the order routing agreement announced today will soon broaden efficient access on or through our CME Globex electronic trading platform to financial markets in Brazil, Mexico, South Korea, Dubai and Malaysia.”

“With this operation BMV increases its presence in the international markets. Greater distribution capabilities are a key part of our strategy to attract more investors to Mexico,” said Luis Tellez BMV Executive Chairman and Chief Executive Officer. “Allowing international investors an easier access into MexDer will improve liquidity and develop the local market. At the same time this agreement will provide Mexican investors with more tools to manage their portfolios.”

The order routing arrangement, which is scheduled to begin in 2011, will give BMV customers access to CME Group’s benchmark derivatives contracts including interest rates, foreign currencies, equity indexes, energy, metals and agricultural commodities. It will also give CME Group customers access to BMV’s interest rate and equity index derivatives.

Source: MondoVisione, 08.03.2009

Filed under: BM&FBOVESPA, BMV - Mexico, Exchanges, Latin America, Mexico, News, Risk Management, Trading Technology , , , , , , , , , , , , , , ,

March 6, 2010 • 7:56 am 1

ETF: BlackRock ETF Industry Review Latin America Industry Review – Year End 2009

BlackRock has just published its Latin America Industry Review Year End 2009 report. This report is a review of the Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) listed globally.

At the end of 2009 the Latin American ETF industry had 17 locally domiciled ETFs, 211 exchange listings, and assets of US$9.84 Bn from three providers on two exchanges.

There are 169 ETFs cross listed in Mexico at the end of December 2009 from eight providers, while there are 340 ETFs registered for sale in Chile from 10 providers, and 277 ETFs registered for sale in Peru from 12 providers.

Read full report of BlackRock_ETF_Latin_America_Review_2009

Source:MondoVisione, 05.03.2010

Filed under: Argentina, BM&FBOVESPA, BMV - Mexico, Brazil, Central America, Chile, Colombia, Exchanges, Latin America, Mexico, News, Peru, Services , , , , , , , , , , , , , , , , , ,

March 2, 2010 • 11:34 am 0

Brazil: Up but volatile – March 2010- IXE-BANIF Monthly Analysis

Strong domestic economy

The debate in developed nations is about the health of their public finance and how this will affect growth in the future. In Brazil the concern is the same, but it is at a different stage. While in some developed countries the debt is at its record high and government deficits are reaching worrying levels, in Brazil public accounts indicate deterioration, but for now they are only clouds in the horizon in a scenario of blue skies for this year and the next. The Brazilian economy is overheated especially in some sectors, and given the low level of past investment, inflation has become an issue (to be resolved in the coming months). In this scenario of a fragile world economic recovery, Brazil and China are clearly trying to avoid bubbles as past stimulus measures were successful. We remain bullish about equities in Brazil, particularly domestic plays, despite knowing that the government will take measures to slow the economic growth. With this in mind we foresee Brazilian stocks moving higher, but not without some volatility.

Ibovespa is a bad indicator

Although we set Ibovespa as the benchmark for this suggested Allocation, we acknowledge it may not be the most adequate index to reflect the Brazilian stock market at the moment. Heavyweight Petrobras has been underperforming the Ibovespa since the government announced the intention to make a capital injection last year. It could reach as much as US$50bn and depending on terms dilutive to minority shareholders. We might be close to have this uncertainty ended and Petrobras could finally trade again based on its fundamentals. Vale, another heavyweight, has also dragged the Ibovespa down this year. Despite an expected increase in prices of iron ore, we feel investors are somewhat skeptical that the world recovery is sustainable and therefore volumes could suffer in the medium term. We already heard of investors willing to swap Vale for Petrobras, but this might only start next month.

Interest rate: no changes in Brazil, US or Europe

COPOM in Brazil will take place on March 17, while the FOMC in US on the 16th and the ECB on the 04th. We believe the market is already factoring in a small interest rate hike in the next COPOM meeting. However, we do not expect any of them (ECB, FOMC or COPOM) to change interest rates in March. Inflation has been high lately in Brazil and at this pace it would lead to a level above the Central Bank’s target for the year (4.5% for 2010). Although the government will do anything at hand to delay an upward trend in interest rate, as recently raised the compulsory rate for bank deposits, we believe it cannot avoid raising the SELIC rate to two digits until YE, from the current 8.75%.

Read full report Brazil – Allocation – March 2010

Source: IXE, Banif, 01.03.2010

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, Risk Management , , , , , , , , , , , ,

• 10:54 am 0

Mexico: Economic recovery, but cautious stance – March 2010- IXE-BANIF Monthly Analysis

Risk aversion at international level should be the tone of the market, as seen last month. Investors should maintain their conservative stance, carefully cherry picking. While Mexico last month presented better than expected GDP figures for 2009 (down 6.5% YoY), inflation keeps trending up and interest rate should move higher, but we do not believe until 2H10 in a prudent and gradual pace.

We set our strategy for the suggested portfolio in March based on specific stock catalysts rather than on sector or top down view. We maintained a high weight on America Movil (AMXL) and GMexico (20% each) and included Autlan and Mexichem. AMXL is still underperforming the IPC and it has been showing a weak performance since it announced the corporate restructuring process involving CGT and TII. We believe the key short term catalyst is the disclosure of details and amount of synergies with this deal. GMexico was strong last month and we expect the uptrend to continue this month. We expect Autlan to present very good sales performance and prices should pick up, given the steel sector recovery worldwide. As for Mexichem, we expect margins to improve as it is entering the chlorine market. See more details of each stock catalyst and risks on pages 02 and 03.

Revising our GDP growth estimate to 4.1%, from 2.9%

After the release of better than expected GDP figures for 2009, despite a contraction of 6.5% YoY, we revised our estimates for 2010 upwards. We now project a GDP growth of 4.1% for Mexico in 2010, versus our previous forecast of 2.9%. We expect improvement from exports, especially services and we highlight the stronger than expected recovery in 4Q09, on a quarterly basis.

Inflation & interest rates to trend up

While annual inflation already suggests it is time to start implementing a more severe monetary policy, we believe the Central Bank will only change interest rates if there are concrete signs that the output gap is closing and idle capacity is close to historical highs. Inflation has been affected by local prices of fuel, electricity and public transportation; hence higher interest rates would not be efficient to bring it down towards the yearend goal. While the market consensus point to a hike already in July/10, we see a more gradual and prudent pace starting at a later time.  We do not anticipate higher interest rates on the meeting on March 19. We believe it should remain at 4.50% this time, but increase to 5.50% until yearend.

Read full report Mexico – Monthly Allocation – March10

Source: IXE, Banif, 01.03.2010

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, Risk Management , , , , , , , , , , , ,

March 1, 2010 • 1:40 am 1

BMV Mexican Stock Exchange’s Market Performance Report January 2010

Click here to download  SE_BMV Mexican Stock Exchange’s market performance report for January 2010

Source: BMV , 26.02.2010

FiNETIK recommends:

BMV- Bolsa Mexicana de Valores – December 2009 Performance Report

BMV- Bolsa Mexicana de Valores – November 2009 Performance Report

BMV- Bolsa Mexicana de Valores – October 2009 Performance Report

BMV- Bolsa Mexicana de Valores – September 2009 Performance Report

BMV- Bolsa Mexicana de Valores – August 2009 Performance Report

BMV- Bolsa Mexicana de Valores – July 2009 Performance Report

BMV – Bolsa Mexicana de Valores – June 2009 Performance Report

BMV – Bolsa Mexicana de Valores – May 2009 Performance Report

BMV – Bolsa Mexicana de Valores – April 2009 Performance Report

BMV – Bolsa Mexicana de Valores – March 2009 Performance Report

BMV – Bolsa Mexicana de Valores – February 2009 Performance Report

BMV – Bolsa Mexicana de Valores – January 2009 Performance Report

BMV – Bolsa Mexicana de Valores – December 2008 Performance Report

BMV -  Bolsa Mexicana de Valores – November 2008 Performance Report

Filed under: Uncategorized , , , , , , , , , , , , , ,

February 27, 2010 • 8:38 am 0

BM&FBOVESPA Voluntary Carbon Credit Market Auction – Sale Will Offer 180,000 Carbon Credits Managed By The Social Carbon Company

The Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA will hold on 08 April 2010, a voluntary carbon credit market auction. A total amount of 180,000 voluntary carbon units from projects managed by the Social Carbon Company will be auctioned.

The emission reductions were generated from 9 renewable biomass projects administered by the Social Carbon Company in ceramic factories. These plants are located in the Brazilian states of São Paulo (Panorama, Paulicéia), Pará (São Miguel do Guamá), Pernambuco (Lajedo, Paudalho), Sergipe (Itabaiana), Minas Gerais (Ituiutaba), and Rio de Janeiro (Itaboraí). The projects involve fuel switching to renewable biomass fuels like sugarcane bagasse, açai seeds, and rice husks, among others. The carbon credits have been validated by certified entities authorized by the United Nations Framework Convention on Climate Change (UNFCCC).

The auction will be held in three sessions, with a lot traded per session. The initial bidding prices will be indicated by lots that vary in accordance to the vintages and are priced at BRL 10.00 to BRL 12.00 per unit. The first transaction will occur at 1:00 p.m. (Brazil Time) and will be carried out by BM&FBOVESPA’s  Carbon Credit Trading System. The financial settlement will be coordinated by Liquidez DTVM brokerage house.

BM&FBOVESPA’s Carbon Credit Market

The Brazilian Exchange has previously organized two carbon credit auctions in 2007 and 2008. Both auctions offered Certified Emissions Reductions (CERs), held by the São Paulo Municipal Government, and generated by the Bandeirantes and São João landfill projects.

The objective of BM&FBOVESPA’s carbon market is to foment carbon credit trading in Brazil within an organized trading environment. It also provides Brazilian companies an opportunity to sell their GHG emission reduction projects in the country. The Exchange’s trading platform offers global participants a secure, transparent, and efficient trading atmosphere with competitive prices.

Source: MondoVisione, 26.02.2010

Filed under: BM&FBOVESPA, Brazil, Energy & Environment, Exchanges, Latin America, News , , , , , , , ,

• 8:27 am 0

India: Co-location services at BSE premises

Bombay Stock Exchange permits DMA and Automated trading. Since Both DMA and Automated trading make use of strategies that exploit short-lived market opportunities and have a high dependence on speed of execution, the co-location facility will facilitate faster trade execution required for DMA and Automated trading. This Co- location Facility will be extended to members to host their servers near to BSE’s trading platform within BSE premises.

In this regard Trading Members may please note the following:

-   In view of limited availability, racks will be allotted on first come first basis based on the receipt of complete application along with the payment. However, if there is more demand than the availability, additional space will be made available.
-   The minimum period for which the racks are allotted will be one year and any renewal would require an advance notice of 30 days.
Format of the Application form for applying for usage of Co-location facility is enclosed Annexure-1
The racks will be allotted on 1 rack basis. No partial rack would be allotted.
Members may take private leased lines to the co located rack(s) for ongoing system administration of their servers. These lines can be availed from Airtel / MTNL / Reliance / Tata

-  Due to security reasons,  Physical access to co-location data centre will be restricted only to the initial set up and access for periodic or urgent maintenance if any would be only with prior permission from BSE and that such permission will be allowed only after Exchange trading hours.

-  The Exchange would not be responsible for insuring the member assets at the co-location premises.
-  The co location facility will be Tier3 grade with following specifications: -

  • Standard 19 Rack(s) with 3KVA power.
  • Uplink ports to BSE Campus LAN for BSE connectivity.

-    The Exchange will provide co-location facility on best efforts basis and it will not be responsible for any direct / indirect / consequential, harm / loss / damage of any kind for whatsoever reason including but not limited to power failure, air conditioning failure, system failure and loss of connectivity. Further, the Exchange shall not be liable for any stoppage in co-location facility owing to legal or regulatory requirement.

Format of the Application form for applying for usage of Co-location facility is enclosed in Annexure -1.

Further you can avail Co-location facilities offered by Third Party Providers. The charges and facilities offered through Third Party Providers will be intimated to the members in due course.

For further technical clarification and queries kindly contact Mr. Jitendra Choudhari on telephone number +91 22 22728301 and email on jitendra.choudhari@bseindia.com

Source: BSE, 26.02.2010

Filed under: Asia, Exchanges, India, News, Trading Technology , , , , , , ,

February 25, 2010 • 5:10 am 0

Cusip and Avox launch business entity identifier scheme

CUSIP Global Service (CGS), managed by Standard & Poor’s on behalf of the American Bankers Association and Avox Limited, a majority-owned subsidiary of the Deutsche Borse Group, announced the launch of the CABRE Directory Service. The service is a combined effort by CGS and Avox to provide a universal identification system for global business entities. The CABRE Directory uses a new standard code developed by CGS and Avox that identifies Issuers, Obligors and Counterparties on a global basis.

“CABRE” is an acronym for CUSIP Avox Business Reference Entity identifier and has been designed to address market need for the lack an accepted universal identification system.

“With regulatory oversight continuing to focus on single name exposure and the need to identify issuers, counterparties and obligors, interest in the CABRE has increased since CGS and Avox announced their partnership last year. The financial industry recognizes CGS’ extensive classification expertise and the value of Avox’s validation processes and methodology,” says Scott Preiss, VP for CUSIP Global Services in New York. “Given their client-driven system of maintaining global entity data, Avox is an ideal partner to augment our time-tested system of unique issuer and obligor identification.”

The CABRE has been designed as a 10-character code that contains the 2-character ISO domicile code based on the location of the entity and embeds the CUSIP Issuer number, when available. The service will be offered to global market participants in a bulk-file format. This initial offering contains CABREs, Avox IDs and location data for over 250,000 entities from around the world and across all industry classes. The goal for CGS and Avox is to identify every institution involved in the lifecycle of a financial instrument.

Ken Price, Chief Executive Officer of Avox stated, “The launch of the CABRE Directory coupled with the data verification expertise within Avox create the foundation of a system that will grow exponentially over the next few years. The availability of a CABRE for each entity location will ultimately help our clients manage diverse areas of their organizations, such as financial controls, risk management, anti-money laundering and operations. Â With this partnership, we can leverage the community of user firms that provide intelligence about changes to business entities taking place every day in the market.”

CUSIP Global Services and Avox support the development of an ISO standard that seeks to develop a common language for global identification of entities but see a near-term need to replace the array of proprietary codes that are currently used by counterparties.

Source: Finextra, 23.02.2010

Filed under: Data Management, Market Data, News, Reference Data, Risk Management, Standards , , , , , , , , , ,

February 23, 2010 • 5:17 am 0

SGX Launches “Trading Strategies Series” Investor Education Series

Singapore Exchange today launched the “Trading Strategies Series” of articles for investors.

Aimed at making professional trading methods accessible to a wider group of investors, the “Trading Strategies Series” is part of investor education efforts by SGX to broaden the knowledge of market participants and over time, enhance market depth.

The series will kick off with six articles on “pair trading”, a trading strategy that can be used in both bull and bear markets. This strategy starts off with the investor selecting two financial products (for example, two stocks, two futures contracts or two exchange traded funds) with prices that tend to move together or are, in other words, highly correlated. When the price ratio of this pair exceeds their normal range, the investor will buy (or go long) one of the two stocks and sells (or go short) a position in another.

Various financial products such as Extended Settlements Contracts (ES), Exchange Traded Funds (ETF)  and Index Futures contracts will be placed under the spotlight in the “pair trading” articles. Written in simple English, the articles provide a step-by-step guide on the trading method, from the identification of highly correlated pairs to simulations using real-live historical data.

The “Trading Strategies Series” of articles are available to the public at

http://www.sgx.com/wps/portal/marketplace/mp-en/investor_centre/investor_resources/educational_articles/trading_strategies_header

and, www.sias.org.sg and seminars covering these topics will be conducted in the coming months.

Source: MondoVisione, 23.02.2010

Filed under: Exchanges, News, Singapore , , , , , , ,

February 21, 2010 • 8:57 pm 1

BMV – Mexico’s Stock Exchange to change trading hours from March 15 – March 31st, 2010

Mexico’s Stock Exchange  will change its trading hours from 08:30-15:00 local time (09:30-16:00 EST) to 07:30-14:00 local time (09:30-16:00 EST) from March 15 thru March 31 to adjust to the daylight savings time diferences between Mexico and the US. Mexico’s Bolsa will continue to trade the same trading hours that the NYSE is open, during that period.

Source: IXE,19.02.2010

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News , , ,

February 20, 2010 • 7:35 am 0

The bumpy road to the international A-share trading board

While government officials and listing candidates are enthusiastic about the launch of the planned trading board, there are several hurdles that remain unresolved.

Designed to allow overseas companies to list shares on China’s major stock exchange, Shanghai’s highly anticipated international trading board is being heralded as a way to provide a powerful lift to the country’s equity markets in the year of the tiger, but it is turning into a paper tiger, experts say.

The planned board, which has been under discussion for years without tangible progress, was brought into the spotlight again last summer after government officials revealed the Chinese authorities’ determination to launch it. However, key issues such as share sale limits, the use of funds raised through share sales, accounting standards, and listing requirements remain unresolved.

Companies aiming for the international board first need to comply with Chinese accounting standards. However, it is very unrealistic to require companies with assets all over the world to comply with Chinese book-keeping rules and auditing standards, industry experts say.

Every year, the translation of an audit report based on general international standards into the Chinese accounting format could cost a typical company from $5 million to more than $10 million extra — an expense that all cost-conscious financial executives would want to avoid, experts say.

Another issue is that the nation’s corporate and securities laws currently only apply to domestic companies, and Chinese lawmakers are not ready to restructure the legal framework and make it more adaptable for foreign companies that want to offer A-shares.

The preparation of HSBC’s highly anticipated Shanghai share sale is suspended for “at least six months”, sources familiar with the deal said last week, citing technical problems in the listing process.

Also, with China running a top-down, command-and-control economy, the current review and approval procedure for the country’s equity capital market is an obstacle for foreign companies, strategists argue.

“Listings in China receive too much intervention by the government,” said Lou Gang, a China strategist at Morgan Stanley. “Launching an international board would test the current system for launching IPOs (initial public offerings),” he said.

Even so, apart from HSBC, other global players such as Standard Chartered Bank and the New York Stock Exchange have also expressed their enthusiasm for listing on the international trading board.

While overseas issuers are concerned about China’s listing regulations, Chinese investors and regulators are worried the outsiders will soak up too much liquidity from the country’s equity market.

The cautious sentiment among investors is evident in online forums in China, where the planned international trading board is hotly debated. Some say the foreign companies will take advantage of the Shanghai market’s high offering prices and valuations and make use of the stock exchange as an automatic teller machine.

Others warn that HSBC’s listing will absorb funds worth as much as 20 Nanpu Bridges in Shanghai — one of the longest highway bridges in the world, with a total construction cost reaching Rmb820 million ($120 million).

“HSBC will take 20 Nanpu Bridges away from us,” one forum participant wrote. “Don’t let the irrigation fertilise others’ fields,” wrote another.

Analysts suggest the authorities should require foreign companies to re-invest the proceeds from their share sales exclusively in China or give approval only to red-chip companies, which are registered overseas but with most of their assets and operations on the Chinese mainland.

Generally, regulators and market observers concur that the introduction of foreign company listings is a must and will help improve the country’s equity markets and accelerate the process of making the Chinese yuan freely convertible.

“Foreign company listings will set a good example for domestic companies in China,” said Wei Sun, Morgan Stanley’s China CEO.

Tu Guangshao, Shanghai’s vice mayor and a former vice-chairman of the China Securities Regulatory Commission, said at the Asian Financial Forum in Hong Kong last month that the municipal government strives to build the city into an international financial centre and that the creation of the planned board is in progress.

The international trading board was first brought to the table by Unilever Company in 2000 when the US retailer of personal care products expressed its interest in an A-share listing in a bid to strengthen its network and brand-name penetration in China. Discussion about the board has been under way ever since, but a concrete plan has yet to be made.

Commerce minister Chen Deming said at an investment conference in Xiamen last September that China will certainly allow listings by qualified foreign invested companies on the mainland stock exchange.

PricewaterhouseCoopers predicted last month that the board will start trading in the second half of this year. The new board may help the Shanghai Stock Exchange (SSE) to raise up to Rmb300 billion ($44 billion) through IPOs this year, overtaking its Hong Kong counterpart, which is forecast to raise HK$300 billion ($39 billion), the international accounting firm said.

Source: FinanceAsia.com,19.02.2010 by Lillian Liu

Filed under: China, Exchanges, News , , , , , , ,

February 18, 2010 • 5:12 am 0

Managing Corporate　Actions Risk – January 2010 – IRD – Insight Reference Data

Despite industry efforts to reduce financial losses typically associated  with corporate actions processing, managing risk remains one of the major challenges for the corporate actions industry. On November 18,  Inside Reference Data gathered leading corporate actions professionals  in a web forum to discuss what more could be done to help improve the situation.

Source: Insight Reference Data, 29.01.2010

IRD_Jan2010_ManagingCorporate Action_ Report

Filed under: Corporate Action, Data Management, Library, News, Reference Data, Risk Management , , , , ,

February 12, 2010 • 9:53 pm 0

BM&F Bovespa raises CME stake; plans new e-trading platform

BM&FBOVESPA S.A. (“BVMF”) hereby announces to its shareholders (in compliance with the provisions of article 157, paragraph 4, of Brazilian Corporate Law No. 6404/1976 and CVM Instruction No. 358/2002 of the Brazilian Securities and Exchange Commission) that on this date it has entered into a Memorandum of Understanding with the CME Group, Inc. (“CME”), which controls the Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), Board of Trade of the City of Chicago, Inc. (CBOT) and Commodity Exchange, Inc. (COMEX), for the creation of a global preferred strategic partnership with an aim to: (i) pursue strategic investments and commercial opportunities with other international exchanges, on a shared and equal basis; (ii) jointly develop a multi-asset class trading platform for the trading of equities, derivatives, fixed income securities and other exchange-traded or OTC-traded assets; (iii) increase its ownership interest in CME to 5%, equivalent on this date to approximately one billion U.S. Dollars (USD1 billion); and (iv) receive a seat on CME’s Board of Directors.

1. BVMF and CME as Global Preferred Strategic Partners

BVMF and CME will work together as “global preferred strategic partners” to jointly identify strategic investments and commercial partnerships with leading equities and derivatives exchanges. BVMF and CME will seek to make these investments and/or partnerships on a shared and equal basis, subject to legal and regulatory restrictions, as well as to the relationship history and specificities of both BVMF and CME in connection to the other exchange where the investment and/or the partnership will be made.

However, when it is not possible or appropriate for BVMF and CME to co-participate, such as when a legal or regulatory restriction applies; or when the third-party exchange of interest is not willing or is unable to partner with either BVMF or CME; or if joint participation is impracticable, the Exchange which holds the leading investment or partnership position will continue the transaction alone.

In order to operate their global preferred strategic partnership, BVMF and CME will hold joint quarterly meetings of their senior executives (Strategic Committee), in order to analyze the potential investment opportunities and commercial partnerships of BVMF and/or CME with any other exchange throughout the world, as well as the attributes, affinities and contributions each might have in connection with the third-party exchange targeted for investment and/or partnership.

2. New Unique and Integrated Multi-Asset Class Trading Platform for Equities, Derivatives, Foreign Exchange, Fixed-Income Securities, Other OTC Products and Block Trading

Based on technology derived from the CME Globex® trading system, as well as on new technology to be jointly created by the parties, BVMF and CME will jointly develop a new electronic trading platform, with capacity to process transactions in less than one millisecond. This new platform will house all of the following BVMF segments under the same infrastructure:

  • Individual equities (cash market);
  • Derivatives based on equities; equity indices, interest rates, exchange rates and commodities;
  • Spot foreign exchange currency;
  • Spot government bonds;
  • Spot private bonds; and
  • Other OTC derivatives.

The new platform will also include a trading system for large blocks of shares (block trading).

The first to be developed will be the derivatives module, which until the beginning of 2011 will replace the Global Trading System (GTS), which is the current electronic trading system utilized by BVMF for its financial and commodity derivatives segment. The second module will be implemented by year-end 2011 to replace the Mega Bolsa, SISBEX and BovespaFIX trading systems currently used by BVMF for the equities, federal government bond and private bond markets, respectively.

Both BVMF and CME will have the right to make commercial use of the new electronic trading system and will share revenues resulting from this commercialization. BVMF will be entitled to commercialize the new platform freely in South America, Central America, Mexico and China. This will apply to other countries as well, where commercial use may occur as long as it is associated with an investment transaction, subject to certain restrictions pertaining to product listing by the exchange where an investment has been made.

BVMF and CME will have co-ownership of the new multi-asset class trading platform, sharing their intellectual properties, as well as the derived enhancements, upgrades and software, as co-authors through cross, perpetual and irrevocable licenses.

As an additional reflection of their new partnership, CME will transfer to BVMF all knowledge that is needed for the operation and development of the new platform, based on the CME Globex® technology. With this transfer BVMF will become fully independent and autonomous to also commercialize the new platform in certain regions and under certain conditions.

For the complete implementation of each phase of the new platform, including the acquisition of all the related underlying technology and intellectual rights, BVMF investments, over the next 10 years, are estimated for the amount of USD175 million (one hundred and seventy five million United States Dollars) at a present value of USD100 million (one hundred million United States Dollars).

3. Increase of BVMF’s Ownership Interest in CME

BVMF will raise its equity stake in CME from the current 1.8% to 5% of CME’s equity capital, placing each company on an equal footing with respect to its equity investment in the other.

This investment by BVMF, which is equivalent to approximately USD620 million, is subject to BVMF shareholder approval, for which in due course a shareholders’ meeting will be called. Adding this amount to BVMF’s current stake in CME brings its total investment to approximately USD1 billion, subject to lockup restrictions until February 26, 2012. This is the same lockup restriction timeframe that applies to the original cross investment.

4. BVMF Representation in CME’s Board of Directors

For the full implementation of their new partnership, CME and BVMF will nominate and recommend to their respective shareholders the election of a representative from each exchange to the other Board of Directors. Therefore, during the time that their minimum reciprocal investments are held, each exchange will have a representative in the other exchange’s Board.

5. Other Joint Opportunities

i. Mutual Cooperation in Central Counterparty Services for OTC Derivatives – BVMF and CME will prospect mutual opportunities to develop the central counterparty services they provide for the OTC derivatives markets. Such opportunities may include netting agreements, collateral management, and the use of CME ClearPort ® technology and know-how for registration, settlement and risk management of OTC derivatives transactions.

ii. Multilateral Order Routing and Market Data Distribution System – BVMF and CME will jointly develop multilateral order routing and/or market data distribution systems for the equities and derivatives markets of both current and future global partner exchanges.

6. Term

The global preferred strategic partnership has an initial term of fifteen (15) years, with the relevant strategic and commercial aspects being realigned on its 5th and 10th anniversaries. During this time, it will continue in effect for as long as each party holds a two percent (2%) minimum stake in the other party’s capital.

7. Expansion and Internationalization of the Equities Segment

The current CME partnership and the development of a new state-of-the-art multi-asset class trading platform will provide BVMF with the best of conditions to support the increase in order flows resulting from the ongoing expansion and development of the Brazilian capital market, as well as the future increase in order flows that will come from the order routing system that NASDAQ OMX is currently developing. Through this system, the connected U.S. broker-dealers will be able to send buy and sell orders for individual equities traded at BM&FBOVESPA, and the connected Brazilian brokers will also be able to send buy and sell orders for individual equities traded at NASDAQ OMX. Therefore, this partnership consolidates BVMF initiatives to provide its users with a solid technological infrastructure, in order to guarantee a globally aligned connection, which is geared towards the broad development of the Brazilian capital markets.

Source:BM&FBOVESPA, 12.02.2010

Brazil’s BM&F Bovespa is increasing its stake in Chicago’s CME Group to five per cent, at a cost of $620 million as part of an agreement between the two exchanges that will also see them jointly develop a multi-asset class electronic trading platform.

The pair, who already have an alliance, say they will become “global preferred strategic partners”, with the Brazilian outfit paying $275.12 per share to increase its stake and put a representative on the CME Group board.

CME Group, which already holds a stake of about five per cent in BM&F Bovespa, will also repurchase up to 2.35 million shares of its common stock to offset the dilution from the issuance of shares to its partner.

In addition, the two will build an electronic trading platform that will be deployed by BM&F Bovespa for use in its cash equities and derivatives markets. Slated to launch early next year, it will be based on technology derived from the CME Globex trading system and able to process transactions in less than one millisecond.

BM&F Bovespa says it expects to spend around $175 million on the related underlying technology and intellectual rights for the system over the next 10 years.

The agreement will also see both given the opportunity to license the platform to other exchanges internationally and they will work together on strategic investments and commercial opportunities.

Edemir Pinto, CEO, BM&F Bovespa, says: “I have no doubt that, after this partnership and based on technology derived from the CME Globex trading system, as well as on new technology to be jointly created by the parties, this new BM&F Bovespa technological standard will produce a system to meet the high performance requirements of the world’s most demanding traders in multiple products.”

Craig Donohue, CEO, CME Group, adds: “Our proposed transaction with BM&F Bovespa will further expand the breadth of our technology and distribution capabilities into the global cash equities and options markets, while strengthening our strategic partnership and enhance our mutual opportunities to invest in and partner with the world’s leading multi-asset class exchanges.”

Source: Finextra, 12.02.2010

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News , , , , , , , , , , , , , , ,