Global Market Structure - Deutsche Bank · Welcome to the APAC Market Structure News Book...

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Deutsche BankEquities

May 2014

Global Market StructureAsia Pacific NewsletterIssue 33

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Global Market Structure

Contents

APAC and ASEAN 4

Hong Kong 6

China 10

Taiwan 13

Japan 15

India 18

South Korea 23

Australia 25

Thailand 27

Singapore 29

Philippines 31

Indonesia 32

Malaysia 33

Chart Definitions 34

Editor

Jessica Morrison, Head of APAC Market Structure [email protected]

Quantitative Content

Winnie Khattar, Head of APAC Analytics [email protected]

Contributors

Shalabh Sood, Feiran Tao, Alexandra Thrum, Timothy Murch

Issue 33, 2014Welcome to the APAC Market Structure News Book containing summaries of regulatory and exchange news accompanied by microstructure analytics.

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Global Market Structure Deutsche BankEquities

Global Market Structure Newsletter Issue 33, 2014

APAC and ASEAN Summary

Source: Thomson Reuters

Fig 1: APAC Volatility (30 day index return volatility)


Fig 2: ASEAN Volatility (30 day index return volatility)


Fig 3: APAC Market Share Distribution


Fig 4: ASEAN Market Share Distribution

USAEuropeAustraliaChinaHong KongIndiaJapanSouth KoreaTaiwan

USAEuropeIndonesiaMalaysiaPhilippinesThailandSingapore

2012 2013 2014Australia 6% 5% 6%

35% 37% 38%China

8% 7% 8%Hong Kong

4% 3% 3%India

26% 34% 31%Japan10% 6% 6%South Korea

5% 4% 5%Taiwan

5% 4% 3%ASEAN

2012 2013 2014

28% 35% 29%Thailand

6% 7% 6%Philippines

17% 16% 21%Malaysia

31% 26% 26%Singapore18% 17% 18%Indonesia


Fig.5 Impact Cost Estimate

Impact Cost Estimate

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times


Fig.6 Turnover Velocity


Fig.8 APAC Market Microstructure Matrix

South Korea Japan Hong Kong Taiwan China India Singapore Thailand Malaysia

Bill

ion

s

Avg Turnover (US$ Bn)

Open Interest (US$ Bn)

141312

141312

0

5

10

15

20

25

30

35

40

45

50

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Apr-13 May-13 Jun-13 Jul-13 Aug-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45


12.

1

6 5 4 3

23











2012 2013 2014Australia 6% 5% 6%

35% 37% 38%China

8% 7% 8%Hong Kong

4% 3% 3%India


5% 4% 5%Taiwan

5% 4% 3%ASEAN

2012 2013 2014

28% 35% 29%Thailand

6% 7% 6%Philippines

17% 16% 21%Malaysia





0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times






Bill

ion

s



141312

141312

0

5

10

15

20

25

30

35

40

45

50

0

0.1

0.2

0.3

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0.5

0.6

0.7


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45


12.

1

6 5 4 3

23











2012 2013 2014Australia 6% 5% 6%

35% 37% 38%China

8% 7% 8%Hong Kong

4% 3% 3%India


5% 4% 5%Taiwan

5% 4% 3%ASEAN

2012 2013 2014

28% 35% 29%Thailand

6% 7% 6%Philippines

17% 16% 21%Malaysia





0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times






Bill

ion

s



141312

141312

0

5

10

15

20

25

30

35

40

45

50

0

0.1

0.2

0.3

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0.6

0.7


0

0.05

0.1

0.15

0.2

0.25

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0.35

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12.

1

6 5 4 3

23

By far the largest development for the region is the announcement of the Shanghai-Hong Kong Stock Connect link that will allow global investors the opportunity to gain exposure to China A-shares. Details can be found in both the Hong Kong and China sections. China’s market share has continued to grow in the region.

Australia and Japan are reported to be considering implications of HFT, India releases FAQs on the new FPI regime and ASEAN continues to develop with the release of draft ASEAN Fund Passport rules, new index products and the appointment of Deutsche Bank as provider of custody and settlement services for the trading Link.

1. Biggest CNY drop in the year, as USD gained after FED raised its interest rate forecasts for next year

2. Japanese yen rallied, as sell off in emerging markets deepened and an increased scrutiny of credit risk in China boosted demand for Japanese assets.

3. China’s 3rd Plenum meeting after 35 years from last to plan next phase of China’s economic reform.

4. INR currency depreciation 14% slide against USD, India’s widened current account deficit.

5. China cash crunch and poor GDP data signaling economic slowdown.6. FED announced tapering of QE3 upon continued positive US economic

data.

1. Strong foreign investor inflows over 3 weeks in Indonesia. Index rallied nearly 5% in 3 weeks2. IDR currency depreciation - 15% fall against USD, and Indonesia’s widened current account deficit.3. FED announced tapering of QE3 upon continued positive US economic data.

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Global Market Structure











2012 2013 2014Australia 6% 5% 6%

35% 37% 38%China

8% 7% 8%Hong Kong

4% 3% 3%India


5% 4% 5%Taiwan

5% 4% 3%ASEAN

2012 2013 2014

28% 35% 29%Thailand

6% 7% 6%Philippines

17% 16% 21%Malaysia





0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times






Bill

ion

s



141312

141312

0

5

10

15

20

25

30

35

40

45

50

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45


12.

1

6 5 4 3

23


Fig 1: APAC Volatility (30day index return volatility)


Fig 2: ASEAN Volatility (30day index return volatility)





0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45 USAEuropeAustraliaChinaHong KongIndiaJapanSouth KoreaTaiwan


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

2011 2012 2013Australia 6% 6% 6%

131211

39% 37% 39%China

9% 9% 7%Hong Kong

3% 4% 2%India

24% 28% 36%Japan12% 11% 6%South Korea6% 6% 4%Taiwan

2011 2012 2013

28% 33% 40%Thailand

4% 6% 6%Philippines

15% 15% 15%Malaysia



Fig.5 Estimated Cost of Trading

0.05.0

10.015.020.025.030.035.040.045.050.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times



0%

50%

100%

150%

200%

250%

Indonesia MalaysiaPhilippinesThailand SingaporeTaiwan AustraliaChina Hong KongIndiaJapan South Korea

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13


1 2 3 4 5

1 2

131211


Fig.7 Primary Futures Turnover vs Open Interest

$0

$10

$20

$30

$40

$50

$60

Malaysia



ThailandSingaporeTaiwan ChinaHong Kong IndiaJapanSouth Korea









0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4



0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

2011 2012 2013Australia 6% 6% 6%

131211

39% 37% 39%China

9% 9% 7%Hong Kong

3% 4% 2%India


2011 2012 2013

28% 33% 40%Thailand

4% 6% 6%Philippines

15% 15% 15%Malaysia




0.05.0

10.015.020.025.030.035.040.045.050.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times



0%

50%

100%

150%

200%

250%




1 2 3 4 5

1 2

131211



$0

$10

$20

$30

$40

$50

$60

Malaysia












0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4



0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

2011 2012 2013Australia 6% 6% 6%

131211

39% 37% 39%China

9% 9% 7%Hong Kong

3% 4% 2%India


2011 2012 2013

28% 33% 40%Thailand

4% 6% 6%Philippines

15% 15% 15%Malaysia




0.05.0

10.015.020.025.030.035.040.045.050.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times



0%

50%

100%

150%

200%

250%




1 2 3 4 5

1 2

131211



$0

$10

$20

$30

$40

$50

$60

Malaysia














2012 2013 2014Australia 6% 5% 6%

35% 37% 38%China

8% 7% 8%Hong Kong

4% 3% 3%India


5% 4% 5%Taiwan

5% 4% 3%ASEAN

2012 2013 2014

28% 35% 29%Thailand

6% 7% 6%Philippines

17% 16% 21%Malaysia





0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%Trade size (%ADV)

Imp

act

Co

st E

stim

ates

(b

ps)

Hang Seng Composite

Nikkei 225

Taiwan TAIEX

NSE S&P Nifty

S&P/ASX 200

Kospi 200

Straits Times






Bill

ion

s



141312

141312

0

5

10

15

20

25

30

35

40

45

50

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7


0

0.05

0.1

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0.25

0.3

0.35

0.4

0.45


12.

1

6 5 4 3

23

Contact

Email: [email protected] Tel: +852 2203 5710

Fig 6. China, Hong Kong and Taiwan’s turnover velocity is up 30%.Japan’s turnover velocity is down 37% from same time last year.

Fig 5. Cost of trading MSCI Asia-ex index is down an average 10% from three months before. Japan impact cost has come down significantly from last year now close to Korea as volatility in Japan has reduced significantly.

Country % APAC Market Share

Turnover Velocity

Primary/ATS Market Share

Expected Arrival Cost 5% ADV Order Size (BPS)

MTD Index Return

YTD Index Return

Avg Spread (BPS)

Avg Trade size

20D Avg. Volatility

Avg. Daily Equity Volume (Mn USD)

Avg. Daily Futures Volume (Mn USD)

Avg. Daily ETF Volume (Mn USD)

China 38% 114% 100% - 0% -7% 10 3,933 0.189 26,526 68,410 111

Japan 31% 179% 89% 19.6 -3% -11% 28 1,585 0.190 21,545 15,320 101

Hong Kong 8% 15% 99% 9.3 -1% -5% 13 5,929 0.152 6,538 7,508 52

South Korea 6% 87% 100% 19.8 -1% -3% 22 99 0.103 5,182 15,975 74

Australia 6% 55% 85% 6.5 2% 3% 12 1,112 0.095 4,197 3,070 11

Taiwan 5% 92% 100% 13.5 -1% 2% 35 5,548 0.083 4,048 5,990 34

India 3% 43% 100% 7.0 0% 6% 5 189 0.099 2,942 2,262 2

Thailand 1% 42% 100% - 2% 9% 40 7,022 0.099 921 301 1

Singapore 1% 9% 100% 13.2 2% 3% 23 5,070 0.089 814 355 1

Malaysia 1% 33% 100% - 1% 0% 30 7,089 0.044 641 154 0

Indonesia 1% 69% 100% - -1% 15% 18 11,711 0.235 585 7 0

Philippines 0% 24% 100% - 3% 14% 17 9,565 0.118 182 - -

6

Global Market Structure Hong Kong


Global Market Structure Hong Kong Newsletter Issue 33, 2014

Market Structure

SFC and CSRC release joint announcement of Shanghai-Hong Kong Stock Connect

On 10th April, the Hong Kong and China regulators issued a joint statement announcing the new trading link that will allow two way connectivity between the Shanghai Stock Exchange (“SSE”) and the Hong Kong Stock Exchange (“HKEx”) within 6 months of the announcement or October 2014. On 29th April, further details were released by the HKEx with Information books and FAQs being released for both investors and market participants.

The scheme will run separately to the QFII and RQFII systems and will allow global investors to gain access to the Shanghai Stock Exchange Security entitlements, that is gain exposure to A-shares in the SSE180, SSE380 or other stocks that are duel listed on the SSE and HKEx. All trades will need to be settled in RMB, in Hong Kong, via a clearing member of the HKEx.

Shares only are in scope for the first stage of this development although there has been press around the potential inclusion of commodity products at a later date. Stocks listed on Shenzhen Stock Exchange are not in scope.

Market participants will need to connect via a new gateway, sessions are being held by the HKEx for operations and IT staff to understand what practical steps will need to be taken for brokers to be able to participate.

A full note was released by the APAC Market Structure team on 30th April,that can be accessed here: http://www.cbs.db.com/new/docs/Deutsche_Bank_APAC_Market_Structure_-_Shanghai_Hong_Kong_Stock_Connect_Infomation_books_and_FAQs_20143004.pdf

The Shanghai Stock Exchange has also released materials, details can be found in the China section of this publication.

FSTB release Open-Ended Fund Companies consultation

The Financial Stability and Treasury Board (“FSTB”) has released a paper titled ‘Open-Ended Fund Companies Consultation Paper’. The paper considers the proposal to introduce a new open-ended fund company (“OFC”) structure to expand Hong Kong’s legal structure for investment fund vehicles.

Currently, an open-ended investment fund may be established under Hong Kong law in unit trust form but not in corporate form (due to capital reduction restrictions under the Companies Ordinance Chapter 622). The FSTB believe that Hong Kong could benefit by offering worldwide fund managers more legal form choices for investment funds.

Below is a summary of the key points including a diagram of the proposed OFC structure.


%

HKG Dark

Fig 4: Lit versus Dark Market Share

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14


Fig 1: Turnover Velocity

An

n.

Exc

han

ge

Turn

ove

r/M

arke

t C

ap (

%)

2012 2013 2014

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fig 1. Full year average - 2014: 16%, 2013: 16%, 2012: 13%


Fig 2: Equities(Cash), Futures and ETFs Monthly ADV

EQUITY FUTURES ETFS

Eq

uit

ies

& F

utu

res

(US

$B

illio

ns)

ETFs

(U

S$

Mill

ion

s)

0

20

40

60

80

100

$0

$2

$4

$6

$8

$10

$12

May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14

Fig 2. Equities and Futures volume continue on a high level despite low volatility in the region. We can expect a boost to local volumes with Shanghai-Hong Kong Stock Connect going live later in the year.

Fig 3. Hang Seng futures volumes are up from April last year.

Fig 4. Dark trading volumes in Asia continue to be low at under 2% of total market share.


Fig 3: YoY futures average daily turnover

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

May-13 Jun-13 July-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14

Mill

ion

s

HSI Fut

Hong Kong

7


Overarching Principles

The principles that the FSTB took into account when developing the policy framework and regulatory approach for OFCs include:

— OFCs to be introduced as an additional legal structure to complement the existing unit trust structure.

— OFCs may be set up as a public or private fund.

— Public OFCs will be subject to the same regulatory requirements as existing public funds.

— However Private OFCs will be given some flexibility (subject to basic governance principles and conduct requirements).

— Adherence to international regulatory practices and standards for the regulation of collective investment schemes (“CIS”).

Proposed Regulatory Framework

— OFCs will be established under the Securities and Futures Ordinance (“SFO”) with detailed regulation contained in a separate piece of OFC subsidiary legislation.

— Detailed operational requirements will be set out in a separate OFC Code (applicable to all SFC-registered OFCs i.e. both public and private).

— OFCs will be supervised by the SFC.

— The new OFC legislation and OFC Code will set out functions and duties of directors and other key OFC operators.

Roles and Functions of Regulators

— SFC will be the primary regulator responsible for the registration and regulation of OFCs under the SFO.

— OFCs will be subject to post-registration monitoring and supervision under the new legislation and OFC Code while public OFCs would also be subject to the post-authorization requirements under the SFC handbook.

— If reasonable suspicion of misconduct exists the SFC will have power to investigate OFCs and their directors and also power to intervene in the OFC’s business and management.

— The Companies Registry (“CR”) will be responsible for the incorporation of OFCs and for the administering of their statutory corporate filings.

— The Official Receivers Office (“ORO”) will be responsible for administering compulsory winding up notices and will also administer relevant breaches under its existing enforcement procedures.

Legal Structure

— OFCs will be structured in corporate form with limited liability and variable share capital. OFCs will share similar characteristics to other conventional limited companies including:

— OFCs will have a separate legal personality.

—OFCs will be governed by a board of directors.

— Shareholders liability will be limited to their shares in the company.

— Constitutional documents will consist of Articles of Incorporation.

— Day-to-day management and investment functions must be delegated to a Type 9 investment manager licensed by or registered with the SFC. (So day-to-day management would be carried out by a qualified professional investment manager with the OFC board providing additional oversight).


Avg

Tra

de

Siz

e

Avg

Sp

read

(B

PS

)

Avg Trade Size Average Spread (BPS)

Fig 5: Average Index Spread and Trade Sizes

Jan-14 Feb-14 Mar-14 Apr-140

2000

4000

6000

8000

10000

12000

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0


Fig 6: MoM Index Price Change

-6-5-4-3-2-101234

FY2013 Jan-14 Feb-14 Mar-14 Apr-14

%

Fig 6. Hang Seng Index nearly recovered from its fall in January on China concerns and strengthening yen earlier in April but dropped again closer to month end following technology sector sell off.

Fig 7. Tencent, Asia’s largest Internet company fell the most past month as it set up a $5 billion medium-term note program to sell debt to institutional investors for the purpose raise money for future investments.

Fig 7: Large and Mid Cap Index movers



-6-5-4-3-2-101234


%

Market Movers - Large Cap Market Movers - Mid Cap

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

0883.HK 10% 2,313,066,000 1.03 0388.HK 18% 3,649,825,000 2.45

0857.HK 5% 1,883,815,000 0.97 0762.HK 18% 1,066,361,000 1.38

0941.HK 4% 4,226,453,000 1.21 0002.HK 5% 387,485,400 0.96

0001.HK 1% 1,329,846,000 1.09 0004.HK 5% 825,290,200 1.11

0013.HK 1% 1,466,351,000 0.81 0003.HK 4% 333,506,300 0.82

1088.HK -6% 936,163,300 1.07 0019.HK 1% 394,877,800 1.12

2628.HK -9% 1,528,532,000 0.91 0006.HK -1% 520,901,600 0.91

1928.HK -11% 2,772,768,000 1.27 0322.HK -4% 221,374,500 0.88

2318.HK -11% 2,567,825,000 1.09 0688.HK -7% 1,348,259,000 1.02

0700.HK -14% 9,125,865,000 1.14 0027.HK -16% 2,763,909,000 1.15

Source: Dealogic

Fig 8: Avg Monthly IPO size and Exchange Market Cap

Average Monthly IPO Volume (US$m) Exchange Market Cap (US$Trillion)

Mar

ket

Cap

(U

S$

tri

llio

n)

IPO

Vo

lum

e (U

S$

m)

68

70

72

74

76

78

80

82

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

FY 13 Jan-14 Feb-14 Mar-14 Apr-14

Fig 8. Smaller IPOs in Hong Kong this season so far compared to 2014 average. Harbin Bank IPO was the biggest in the month of March with the deal size of US$ 1.1Bn

8


— The investment manager will need to comply with existing Code of Conduct regulatory requirements.

— The OFC board will only comprise of natural persons.

— Directors will be subject to the same statutory and fiduciary duties owed to conventional companies.

— Individual directors will not need to be licensed under the SFO.

— OFC assets must be segregated from those of the investment manager and they must be entrusted to a separate and independent custodian which needs to be incorporated in Hong Kong.

Incorporation and Registration

— OFCs would not be required to be licensed as a licensed corporation under the SFO, however they would be required to be registered with the SFC.

— The investment scope of the OFC should align with the type of investment activities already being performed by the investment manager which are subject to licensing and regulation by the SFC, for example securities, futures and OTC derivatives (once the relevant legislative amendments to the SFO have become effective).

— OFCs are not designed to undertake commercial trade.

Share Capital

— OFCs will have the flexibility to vary its share capital.

— Due to this open-ended nature the Companies Ordinance share capital rules relating to maintenance, increase and reduction of capital are not applicable.

— OFCs may make distributions out of share capital subject to solvency and disclosure requirements (i.e. the Companies Ordinance share capital distribution restrictions are not applicable).

Umbrella Funds

— Where sub-funds are created under an umbrella company there will be a legally enforceable segregation of each sub-fund’s assets and liabilities.

— Therefore each sub-fund would be legally ring-fenced from other sub-funds and also from the umbrella company itself.

Terminating and Winding Up OFCs

— Termination of OFCs would be subject to SFC approval.

— It is expected that termination of solvent OFCs will be relatively straight forward if in accordance with the specific provisions of the OFC Articles.

— Winding up of OFCs would be subject to similar requirements as conventional companies with similar protection for shareholders and creditors.

— As mentioned above the ORO would administer compulsory winding up notices.

Tax Regime

— The existing profits tax exemption for public funds will apply to public OFCs.

— For private OFCs, profits tax exemption will be available under the existing regime for offshore funds with its central management and control (“CMC”) located outside Hong Kong.

— Exemptions or partial exemptions will be considered for private OFCs located onshore.

— Transfers in shares of OFCs will be subject to stamp duty.

Comments must be received by 19th June, to access the full paper click here:http://www.fstb.gov.hk/fsb/ppr/consult/doc/ofc_e.pdf

Proposed OFC Structural Diagram

Source:http://www.fstb.gov.hk/fsb/ppr/consult/doc/ofc_e.pdf

Source: Dealogic

Fig 9: IPO Sector Distribution

0% 20% 40% 60% 80% 100%

Auto/Truck

Construction/Building

Consumer

FIG

Healthcare

Industrials

M&M

REGAL

TMT

Utility & Energy

Jan-Mar'14

Apr,2014


Fig 10: IPO Performance

Source: Dealogic


# of IPO 1 day 1 month Current

Jan-14 12 61% 43% 14%

Feb-14 4 28% 53% 34%

Mar-14 4 -8% -12% -13%

Apr-14 3 -5% - -13%

Fig 10. IPOs from earlier in the year trading in positive performance despite index moves.

OFCCustodian

InvestmentManager

• SFC licensed / registered for Type 9 RegulatedActivity

• Day-to-day management of the OFC

• Investment functions

OFC BoardIndividual directors not

required to be licensed by the SFC but they owe statutory and fiduciary

duties to shareholders as a whole

Shareholders

Assets

Mandatory delegationof investment functions

Safekeepingof assets

for the OFC

9


BCBS issue New Large Exposures Framework

On 15th April, the Basel Committee on Banking Supervision (“BCBS”) issued a new supervisory framework for measuring and controlling large exposures. The framework is intended to ensure consistent approaches across jurisdictions and to constrain losses banks suffer when counterparties fail by prescribing certain counterparty exposure limits. The framework includes the following highlights:

Timing

— The framework is due to take effect from 1st January 2019.

— It will supersede the BCBS large exposures guidance from 1991. (Note that the 1991 guidance forms the basis of large exposure rules across many jurisdictions including Hong Kong).

— By 2016 the BCBS will also consider setting exposure limits on exposures to ‘qualifying central counterparties’ relating to clearing activities.

Exposure Limits

— A general limit of 25% of a bank’s Tier 1 capital is to be applied to all of the bank’s exposures to a single counterparty.

— This limit also applies to identified groups of connected counterparties.

— Furthermore a specific limit of 15% of Tier 1 capital will be applied to exposures between global systematically important banks (“G-SIBs”).

On 24th April the HKMA confirmed that they intend to implement this new standard in line with the BCBS dates mentioned above and that the implementation proposal for Hong Kong will be subject to industry consultation in due course.

To access the full paper click here:

http://www.bis.org/publ/bcbs283.htm

Simplified HKMA Reporting for RMB Statistics

On 2nd April the HKMA confirmed that the RMB statistics reporting requirements for Authorized Institutions (“AIs”) will be simplified. The existing Return of RMB Business Activities MA(BS)16 is being consolidated with the following five surveys into a single return:

— RMB conversions for non-Hong Kong residents.

— RMB remittances for non-Hong Kong residents.

— RMB Correspondent Banking Activities.

— RMB Liquidity Position.

— RMB Trade Position.

The new consolidated return should be filed within 21 days from the end of each calendar month starting from the position of December 2014. (The HKMA will advise AIs when the new reporting template is available for download from their private website). Return submission will be through the STET system.

Venue News

HKEx announce plans to launch their first commodity contracts

The HKEx announced their plans to launch four commodity futures contracts later this year (subject to regulatory approval and market readiness). The four commodity futures are:

— London Aluminium Mini Futures.

— London Zinc Mini Futures.

— London Copper Mini Futures.

— API 8 Thermal Coal Futures.

Charles Li confirmed that “this is just the beginning of our Asia Commodities plan”.

For further details on the four contracts see the following HKEx news release:

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2014/140422news.htm

Personnel Changes

HKEx Board reappoints Chairman

The HKEx Board has reappointed Mr. Chow Chong Kong as Chairman of the HKEx and the reappointment was subsequently approved by the Chief Executive of the Hong Kong Special Administrative Region. For further details including revisions to the composition of certain HKEx Committees see the following HKEx news release:http://www.hkex.com.hk/eng/newsconsul/hkexnews/2014/1404172news.htm

Sources:www.sfc.hk

www.hkex.com

www.ft.com

www.automatedtrader.net

www.scmp.com

Contact


10

Global Market Structure China


Global Market Structure China Newsletter Issue 33, 2014

QFII and RQFII updates

The following new QFII licenses received quota in March and April:

March: 1. Mega International Investment Trust Co., Ltd., US$100 million

2. Hua Nan Investment Trust Corporation, US$50 million

3. Monetary Authority of Macao, US$500 million

4. European Reinsurance Company of Zurich Ltd., US$100 million

April:1. The Washington University, US$50 million

In addition, SAFE the following quota was granted to existing QFIIs.

March:1. Government of Singapore Investment Corporation Pte Ltd., US$500

million

2. Macquarie B ank Limited, US$200 million

April1. Capital Securities Investment Trust Co. Ltd., US$50 million

2. Board of Regents of The University of Texas System, US$50 million

3. Nam Shan Life Insurance Company, Ltd., US$200 million

4. British Columbia Investment Management Corporation, US$200 million

5. CITIC Securities International Investments Management (HK) Limited, US$200 million

6. Prescient Investment Management PTY LTD, US$100 million

Separately, SAFE granted new RQFIIs the following quota.

March:1. UBS Global Asset Management (Hong Kong) Limited, RMB 1 billion

2. Greenwoods Asset Management Hong Kong Limited, RMB 1 billion

3. Fortune SG Asset Management (Hong Kong) Co., Limited, RMB 1 billion

February:None

The following was granted to existing RQFIIs.

January:1. Harvest Global Investments Limited, RMB 1 billion

2. Bosera Asset Management (International) Co., Ltd., RMB 2 billion

3. E Fund Management (HK) Co., Limited, RMB 2 billion

4. Fullgoal Asset Management (HK) Limited, RMB 1 billion

5. ICBC (Asia) Investment Management Company Limited, RMB 1.5 billion

6. Huatai Financial holdings (Hong Kong) Limited, RMB 1 billion

7. Guotai Junan Financial Holdings Ltd., RMB 800 million

8. Haitong International Holdings Limited, RMB 3 billion

9. China Merchants Securities (International) co. Ltd., RMB 1 billion



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Fig 2. China futures volume on the rise in March and April, up 21% from Feb 2014 level while ETFs volume continues to decline.

Fig 3. Increased trading in domestic CSI300 futures following the announcement of Hong Kong Shanghai Stock Connect in April.



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0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

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Fig 4. Trading in Shanghai stock exchange also increased last month following the announcement of Hong Kong Shanghai Stock Connect.

China

11


*Note: The above graph shows QFII licenses with quota (237), while the total QFII licenses been granted by CSRC is 258. Source: Deutsche Bank, CSRC, SAFE

QFII Licenses and Quota Granted

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD

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State Council releases Guiding Principles for the Healthy Development of Capital Markets

On 9th May, the State Council of China released the above titled Guiding Principles that set out developments in nine major areas. The Guidelines, or ‘New National Nine Rules’, are an update on the ‘National Nine Rules’ released in 2004 and follow the 2008 12 year plan that set out plans for a “multi-layered” capital market meaning both diversity of investors and investment products.

The Nine Rules emphasise the opening of the capital markets and are released shortly after the announcement of the Shanghai-Hong Kong Stock Connect programme and confirms the market can expect further liberalisation of QFII and QDII with increases in both inward and outward investment quotas. Shareholder limits for foreign investors will be relaxed and capital account convertibility in the Shanghai FTZ will develop the offshore RMB market with cross border remittances becoming permissible.

These are the headline Nine Rules:

1. Overall requirements2. Stock Market3. Bond Market4. Private Equity5. Futures market 6. Competitiveness of the securities and futures sector7. Capital market openness8. Financial Risks

9. Market Regulation

Deutsche Bank Research Analyst, Lin Li, released a full report on 12th May, if you would like to see a copy we can supply this on request.

Deutsche Bank opens sub-branch in Shanghai FTZ, investment and development plans progress

In a ceremony on 9th May, Deutsche Bank opened their new premises in the Shanghai Free Trade Zone (“FTZ”) with the doors opening for business from Monday 12th May. The FTZ, which opened in September 2013, is a segregated area that will operate to different regulatory and tax regimes in order to facilitate international business. Other stated aims are to introduce a market based interest rate mechanism and allow fully convertible RMB. It has been agreed that ‘qualified’ Chinese individuals working in the FTZ will be permitted to make direct outbound investments including in securities, the definition of these terms are to be confirmed. Non-bank entities will be able to receive investment from overseas in RMB or foreign currencies to suit their operational needs.

Over 1,4000 new enterprises are now in operation, the total registered capital of the foreign-invested enterprises (“FIE”) reaching US$0.56 billion with domestic enterprises adding a further US$5.6 billion. RMB 10 billion has been set as ide for the development of the FTZ, being dubbed ‘mini Hong Kong’ to build offices, entertainment facilities, shopping centres and exhibition halls covering up to 500,000 square metres . A Pudong official stated:

“There will eventually be a huge amount of investment in Lingang [New City]. City officials was to make sure the free-trade zone will be a success.”

10. Guoyuan Securities (HK) Co., Ltd., RMB 800 million

11. Taikang Asset Management (Hong Kong) Limited, RMB 1 billion

12. China Life Franklin Asset Mgt Co Ltd, RMB 1.5 billion

13. Taiping Asset Management (Hong Kong) Company Limited, RMB 500 million

April:1. CSOP Asset Management Limited, RMB 3.5 billion

2. Da Cheng International Asset Management Co., Ltd., RMB 1 billion

3. UBS SDIC Asset Management (Hong Kong)Company Limited, RMB 1 billion

4. Shenyin Wanguo (HK) Limited, RMB 1.5 billion

5. Guotai Junan Financial Holdings Ltd, RMB 1 billion

6. GF Holdings (Hong Kong) Corporation Limited, RMB 1 billion

7. CCB International Asset Management Limited, RMB 1.5 billion

8. Taikang Asset Management (Hong Kong) Limited, RMB 1 billion

9. ABC International Asset Management Limited, RMB 1.5 billion

10. Industrial Securities (HK) Financial Holdings Limited, RMB 800 million

11. Value Partners Hong Kong Limited, RMB 500 million

12. Mirae Asset Global Investments (Hong Kong) Limited, RMB 800 million


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Fig 6. Biggest CNY drop in the year pulled the index down as well in March, as USD gained after FED raised its interest rate forecasts for next year.


Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

000625.SZ 24% 1,644,104,000 1.34 600827.SS 27% 1,371,066,000 1.53

600383.SS 20% 1,769,835,000 1.57 601231.SS 27% 491,161,500 1.43

600372.SS 13% 673,389,100 1.04 000402.SZ 24% 1,033,761,000 2.22

002353.SZ 12% 592,300,000 1.10 000061.SZ 22% 605,015,700 1.39

002304.SZ 9% 539,358,000 0.64 600597.SS 14% 718,001,500 0.98

600309.SS -9% 575,908,700 0.86 002385.SZ -14% 443,716,000 0.94

601607.SS -10% 448,249,500 0.73 600688.SS -14% 489,022,700 0.54

600340.SS -10% 1,413,785,000 1.39 000046.SZ -15% 266,948,200 1.82

002024.SZ -12% 1,732,754,000 0.60 601118.SS -16% 661,393,800 0.67

000039.SZ -16% 399,007,500 0.70 002146.SZ -16% 1,661,622,000 1.42

Source: Dealogic



12


The Shanghai No. 2 Intermediate People’s Court has issued regulations covering the treatment of arbitration appeals. The Court has been asked to review the validity and enforceability of arbitration rulings made by the Shanghai International Arbitration centre, the Court will be required to hold hearings within 15 days and make decisions within 30 days. Shorter times frames have been set for small claims. Having legal certainty is considered crucial for the success of the FTZ as the business community will want to have confidence in the contracts that they agree.

Operating guidelines are yet to be released, the SSE reports that draft rules were submitted to the Shanghai People’s Congress on 22nd April. Plan include the creation of a ‘negative list’’ No decision will be released until the next monthly meeting.

CSRC updates IPO regulations, reveals prospectuses of an additional 211 IPO applicants

As reported on 4th May, 12 applicants have applied for listing on the Shanghai Stock Exchange (“SSE”), 5 for the Shenzhen Stock Exchange (“SZSE”) small and medium sized enterprises board and 8 for ChiNext bringing the total number of applicants released since 19th April to 211. 3 of those applicants were given approval on 30th April taking the total number of companies waiting to list to over 600.

CSRC has required candidates that had already passed the listings hearing to submit issuance plans and related materials. There are 27 such firms, reports are mixed as to the likelihood of final approvals being obtained.

Venue News

Further rules on MMA released for comment by SSE

As highlighted in the Hong Kong section of this issue, and detailed in the 30th April special release on the Shanghai-Hong Kong Stock Connect link that will provide mutual market access (“MMA”) between the two exchanges, the SSE has also released rules to the market for comment. Given the trading, listing and clearing rules of the executing market will apply, it is essential the international investors seeking to trade through the new link have a thorough understanding of the Shanghai and broader China rules to ensure they stay within the regulatory boundaries.

Under current regulations, short selling, margin trading, day trading, block trading and market price orders are not permitted. For the new Southbound flow (where Mainland investors will be able to trade HK stocks), investors must appoint one securities house as sole broker and deposit the cash with a third party custodian bank.

The quotas in the table following are net, however, if the daily quota is used buy orders will be rejected until the next trading day. Sell orders will not be effected. If the outstanding amount of total quota at the end of the trading day is less than the daily trading quota, buy orders will be rejected on the next trading day.

The Shanghai rules also confirm that Northbound investors will be subject to foreign shareholding limits, information disclosure requirements and relevant disposal requirements where the holding limit is breached as applied to QFII and RQFII license holders.

The rules are available in Mandarin only .

Aggregate limit

Daily limit

Investors Securities

NTL RMB300 billion

RMB 13 billion

All investors based in Hong Kong and overseas.

SSE 180 Index

SSE 380

Any stock dual listed on SSE and SEHK that is RMB denominated

STL RMB250 billion

RMB10.5 billion

All institutional investors and qualified individual investors with not less than RMB500,000 in their securities and cash accounts.

Hang Seng Composite LargeCap Index

Hang Seng Composite MidCap Index

Any stock dual listed on SSE and SEHK that is RMB denominated

Preference shares come to Shanghai

Following CSRC’s approval of the new share class in March, two companies have announced plans to issue preference shares. The Shanghai Pudong Development bank and Guanghui Energy Co. Ltd. are looking to have a share class that will allow priority rights over ordinary shares in the distribution of profits and residual assets although usually without voting rights.

SSE will not extend trading hours

Following speculation that the SSE may extend it’s hours to match those in Hong Kong, the exchange has been reported as confirming they do not intend to extend the current 3pm close.

SZSE releases QFII/RQFII rule update

On 25th April, the Shenzhen Stock Exchange released rules that expanded the range of products license holders are permitted to trade to include stocks, bonds, funds, warrants, asset-backed securities and other types of securities traded or transferred on the SZSE.

The number of securities houses that can be appointed has also been expanded to 3 (although it should be noted that there are a number of prohibitive operational restrictions in place) and the foreign ownership limit has been increased from 20% to 30%, matching the recent change on the SSE. A disposal method for reducing shareholdings exceeding the proper proportion is explicitly defined.

For the full notice click here: http://www.szse.cn/main/en/AboutSZSE/SZSENews/SZSENews/39751872.shtml

Personnel Changes

Yi Gang tipped as next central bank headIt has been reported that Yi Gang may be the next chief of the People’s Bank of China once Zhou Xiaochuan retires. Yi is currently working as Director of SAFE. Other candidates that have previously been considered in favour are Shang Fulin, chief of the China Banking Regulatory Commission (“CBRC”) and the ex CSRC Chairman Guo Shuqing.

Sources:www.csrc.gov.cn www.safe.gov.cn www.english.sse.com.cn/ www.szse.cn www.ecns.cn

www.wantchinatimes.com www.chinatopix.com www.english.cntv.cn www.scmp.com

13

Global Market Structure Taiwan


Global Market Structure Taiwan Newsletter Issue 33, 2014



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Market Structure

TWSA consider tick size increase proposal

The Brokerage Business Committee of the Taiwan Securities Association (“TWSA”) are considering a proposal to increase the current price tick levels on TWSE listed equity products as shown in the table below. The intention would be to attract more day trading clients by increasing the price fluctuation within trading hours. The bands proposed are as follows:

Price Range Current Proposed

P <10 0.01 0.05

10 ≤ P < 50 0.05 0.10

50 ≤ P < 100 0.10 0.50

100 ≤ P < 500 0.50 1.00

500 ≤ P < 1,000 1.00 5.00

1,000 ≤ P 5.00 10.00

SFB permit research to be sent to non-clients

For the first time the Securities and Futures Bureau (“SFB”) provided written confirmation that brokers are permitted to send research reports to professional / institutional investors who are not their clients. Previously, per TWSE / GTSM recommendation rules, brokers could only provide research to their own clients.

Taiwan market capitalisation reaches record high

The combined market capitalisation of the TWSE and GTSM reached a record high during April despite recent political unrest within the student community. The aggregate market capitalisation across both exchanges was approximately TWD28 trillion (approximately TWD25 trillion on TWSE and approximately TWD3 trillion on GTSM) with gains largely driven by strong overseas institutional demand.

Venue News

TWSE looking to set up cross-border trading platform with the Singapore Exchange

TWSE Chairman Lee Sush-der confirmed in an interview with Bloomberg that the TWSE are currently in talks with the Singapore Exchange to create a cross-border trading platform. Lee said such a platform could “provide more choices and help reduce costs for investors” whilst also boosting the global visibility of the TWSE.

The working group is currently discussing the logistics however it is expected that such a platform could initially consist of 30 to 50 stocks from each market and be available by the end of 2014.


%


TAI 1.89% TWO 1.89%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%


Fig 3. Trading in Electronics and Taiex futures picked up with foreign institutional investors long positions on electronics futures contracts.

Fig 1. Full year average - 2014: 85%, 2013: 75%, 2012: 78%. Growth in US, helps boost trading in Taiwan which is highly dependent on tech sector exports.



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Fig 2. Futures and ETFs trading in Taiwan picked up on the back of foreign institutional investment in electronics sector.

Taiwan

14

Global Market Structure Taiwan

Sources:http://www.chinapost.com.tw

http://www.wantchinatimes.com

http://www.reuters.com

http://www.businessweek.com

http://www.chinadaily.com.cn

http://smartbrief.com

http://www.risk.net

http://focustaiwan.tw

Source: Dealogic


Jan-Mar 2014 Apr 2014

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Auto/Truck

Industrials

TMT



Source: Dealogic



Jan-14 3 17% 11% 21%

Feb-14 1 27% 39% 44%

Mar-14 1 26% 37% 39%

TWSE to sign an MOU with Shanghai Stock Exchange

In addition to the talks with the Singapore Exchange, the TWSE are also expected to sign a memorandum of understanding (“MOU”) with the Shanghai Stock Exchange. CY Huang, director of the Taiwan M&A and Private Equity Council said “the MOU will promote cooperation in the primary market of the two parties”.

TWSE Chairman Lee Sush-der commented that such cooperation could include the ability for companies on both sides to list on each other’s exchanges and to compile indexes for each other though the timelines are not yet certain.

TWSE launches Formosa Stock Index

On 5th May, the TWSE (in collaboration with the GTSM) launched the Formosa Stock Index to track the combined performance of both the main board and the OTC market. The Formosa Stock Index consists of 1,478 stocks (821 from the main board and 657 from the OTC market) and is intended to function in a similar way to China’s Shanghai Shenzhen CSI 300, Japan’s JPX-Nikkei Index 400 and South Korea’s KRX 100.

TWSE Chairman Lee Sush-der said “Taiwan needs a combined index to portray a complete picture of the local market”. The index was created using share prices from the end of 2013 with a base of 10,000 points and is available on global media outlets (for example Reuters and Bloomberg). Taiwan’s Financial Supervisory Commission chairman Tseng Ming-chung hopes that the index will lead to the introduction of other related financial products such as ETFs, futures and warrants.

TWSE are also looking into the feasibility of an Index to cover Taiwan, China and Hong Kong.

TAIFEX and EUREX launch CNH futures

Following on from the recent announcement of bilateral business between TAIFEX and EUREX it has been confirmed that the two exchanges are working together to launch CNH futures (either USD-CNH or EUR-CNH). The contracts will be initially listed on TAIFEX (making it the third exchange globally to list such futures) and then subsequently cross-listed on EUREX.


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20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

2402.TW 55% 531,594,700 1.94 2390.TW 67% 258,911,100 2.40

3673.TW 28% 2,430,629,000 1.61 5269.TW 48% 75,022,600 2.38

6153.TW 27% 406,075,700 2.10 1215.TW 31% 80,273,620 2.39

3008.TW 27% 1,234,676,000 1.12 8210.TW 27% 58,064,430 2.58

3474.TW 24% 1,234,274,000 1.69 3229.TW 24% 119,816,000 3.08

5280.TW -20% 304,088,700 1.36 3356.TW -18% 65,824,320 1.14

3022.TW -22% 242,875,300 1.06 4916.TW -18% 16,126,010 0.35

2913.TW -24% 82,344,730 0.85 2436.TW -19% 107,381,500 0.80

1337.TW -28% 150,142,000 1.00 2929.TW -19% 56,588,490 0.73

2206.TW -45% 312,632,700 2.64 2062.TW -30% 111,993,500 1.51



-6-5-4-3-2-101234


%


Source: Dealogic



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Fig 6. Taiwan Stock Exchange Weight Index hit a two-year high as tech sector stocks help power the export-dependent country.

Fig 5. Taiwan ranks 3rd in Asia with respect to largest trade sizes

15

Global Market Structure Japan


Global Market Structure Japan Newsletter Issue 33, 2014



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Market Structure

FSA announces creation of Asian Financial Partnership Center

On 30th April the Financial Services Agency (“FSA”) in Tokyo announced the creation of the Asian Financial Partnership Center (“AFPAC”). AFPAC will consist of government officials from various financial authorities across Asia and their activities and objectives will include:

— Strengthen cooperation between Asian financial authorities,

— Contribute to Asian financial infrastructure development,

— Perform research on Asian financial market issues and challenges,

— Host seminars and conferences.

For the full announcement please see the following FSA webpage:

http://www.fsa.go.jp/en/news/2014/20140430-1.html

Venue News

JPX to inspect participant order management systems, increased number of orders

The Inspection Plan for 2014 has been announced by the Participants Examination and Inspection Department of Japan Exchange Regulation. Around 35 participants will be selected for on-site inspection on a risk based approach with regard given to past inspections, trading activities and offsite monitoring information.

The following items were identified for priority inspection:

— Development of order management and related system management. The increasing market presence of High Frequency Trading is cited as an environmental reason for looking into order limits on trading volumes and value to ensure they are properly set. Not only limits in large orders will be considered but controls over large amounts of small orders and position management will be reviewed.

— Responses based on recent increases in order numbers. Given the rise in the number of orders and executions, participants will be assessed on whether proper consideration has been given to system capacity, management of unfair trading practices and compliance with trading restrictions for newly listed issues (same day receipt of purchase funds from customers).

Also in scope for inspection will be corporate information management. It should be noted that as of 1st April 2014, criminal penalties or administrative monetary penalties shall be applied to sharing inside information. A further topic for consideration will be participant’s compliance with rules pertaining to customer margin for margin transactions and collateral for futures / options and risk management of such transactions is also planned.

The full plan is available on the Japan Exchange Regulation website under the link below:http://www.jpx.or.jp/en/self-regulatory-activities/ensuring/maintaining/n3t9t90000000mr8-att/n3t9t90000000o5o.pdf




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Fig 2. Japanese equities market seems to be correcting itself sharply after last year’s Abenomics-inspired rally as trading slows across asset classes. The government of Japan is still campaigning to force Japan’s large pension funds to reduce their outsized holdings of government bonds and shift into other assets, like equities in order to retain the trading volumes.

Fig 4. Chi-X and Japannext seems to be gaining back their market share after steep decline observed in names that underwent small tick early in January this year.

Fig 3. Effect of foreign investor sell-off in Japan is visible on futures volume as well.


%

TYO 1.16% JNX 1.12% CHJ 0.04% FKA


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%


Japan

16


Source: Dealogic



0% 20% 40% 60% 80% 100%

Auto/Truck


Consumer

Healthcare

Industrials

REGAL

TMT



Source: Dealogic



Jan-14 1 21% 32% 30%

Feb-14 3 54% 28% 1%

Mar-14 11 46% 51% 32%

Apr-14 5 36% - 38%

Japan Exchange Group release 2013 trading overview

The JPX have released an overview of Equity and Derivative trading statistics for 2013 (and also for March 2014). Several annual records were set in 2013 including:

— 785 billion domestic 1st section stocks traded (with ¥652 trillion trading value being the third highest after 2006 and 2007)

— Trading volume and trading value of ETFs at 5 billion units and ¥24 trillion respectively,

— Trading value of REITs at over ¥8 trillion,

— JPX derivative contracts traded at almost 356 billion.

Japan Exchange Regulation re-branding

Note that on 1st April the Tokyo Stock Exchange Regulation was rebranded as Japan Exchange Regulation. Please click link below for the new web page:http://www.jpx.or.jp/en

Tokyo Stock Exchange to assist with the creation of the Yangon Stock Exchange

Dr Maung Maung Thein (Deputy Minister for Finance, Myanmar) announced that the Tokyo Stock Exchange (“TSE”) and the research team from the Japanese Ministry will work together with the Finance Ministry of Myanmar to establish a new stock exchange in Yangon, Myanmar.

It is expected that the initial investment of approximately US$32 million will be jointly funded by Japan and Myanmar with Myanmar owning 51% of the joint venture.

The proposal is currently pending review by the Myanmar Attorney General and will be formally announced once approved.

Tokyo Stock Exchange encourages firms to adopt IFRS

The TSE provided an update confirming they are actively encouraging listed companies to adopt International Financial Reporting Standards (“IFRS”). It is hoped that such a move would:

— Increase international standardization,

— Raise international competitiveness,

— Facilitate more streamlined consolidated financial reporting for Japanese companies with international subsidiaries,

— Allow investors to perform better global peer analysis potentially leading to more investment in Japanese companies.

See link below for the TSE update:

http://www.tse.or.jp/english/listing/ifrs/index.html


Avg

Tra

de

Siz

e

Avg

Sp

read

(B

PS

)



0

500

1000

1500

2000

2500

3000

3500

0

10

20

30

40

50




-10

0

10

20

30

40

50

60

%


Fig 6. Primary equity indices in Japan have dropped over 10 percent this year in local currency terms as trading slows and sell off in emerging markets, china concernsput pressure on currency. Index fell nearly 5% in month of April alone.


Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

7276.T 25% 530,459,700 1.50 3178.T 33% 59,868,450 2.26

5541.T 23% 481,356,100 2.09 8170.T 24% 39,826,650 1.47

5713.T 20% 1,367,430,000 1.43 2292.T 24% 20,494,220 1.65

3048.T 18% 121,323,600 1.63 1934.T 19% 10,479,710 1.59

6755.T 18% 202,877,300 1.18 7552.T 19% 74,297,010 2.77

6506.T -19% 735,597,000 0.93 4686.T -21% 64,729,450 0.56

9684.T -20% 1,023,819,000 0.49 6054.T -22% 84,052,750 1.05

9509.T -20% 464,482,200 2.02 3064.T -22% 234,293,400 1.01

3092.T -21% 397,121,800 0.79 6617.T -23% 19,012,300 1.03

2678.T -21% 133,879,200 0.86 3769.T -30% 246,664,900 1.46




-6-5-4-3-2-101234


%

Source: Dealogic

Average Monthly IPO Volume (US$m)

Exchange Market Cap (US$Trillion)

IPO

Vo

lum

e (U

S$

m)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500



Mar

ket

Cap

(U

S$

tri

llio

n)

272

274

276

278

280

282

284

286

288

Fig 8. 15 IPOs took place in the month of March, with Japan Display (6740) being the biggest at 3Bn US$. The stock was trading at a 10% discount to IPO price in a month from its listing

17


Japanese Exchange Group sign MOU with Uzbek exchange

In April it was reported that the Japanese Exchange Group (“JPX”) have signed a memorandum of understanding (“MOU”) with the Republican Stock Exchange of Uzbekistan “Toshkent” RSE.

Under the MOU the Uzbek exchange and JPX will collaborate on areas such as:

— Sharing of best practices, expertise and market operations information,

— Improvement of IPO and underwriting practices,

— IT systems,

— Disclosing information on a timely basis,

— Setting up a working group to research the two markets and host seminars and training sessions.

Contact


Sources:www.tse.or.jp www.jpx.or.jp/en www.azernews.az www.elevenmyanmar.com

18

Global Market Structure India


Global Market Structure India Newsletter Issue 33, 2014



SGX Nifty NSE Nifty Banks NSE Nifty

$0

$500

$1,000

$1,500

$2,000

Mill

ion

s




EQUITY FUTURES ETFS

Eq

uit

ies

& F

utu

res

(US

$B

illio

ns)

ETFs

(U

S$

Mill

ion

s)

0

2

4

6

8

$0

$1

$2

$3

$4


Market Structure

SEBI issues FAQs for FPI regime; RBI notifies simplified KYC requirements for FPIs

An FAQ document has been released, below is a summary of the key trading considerations.

Transition from FII to FPI

Current FIIs and sub accounts (“SA”) may continue to deal until the expiry of their current registration. Existing depository and bank accounts can be retained. All existing investments can be grandfathered although no new positions may be added where the FPI is not able to invest.

— If a FII chooses to convert to FPI, all of the SAs will be required to convert. If the SA chooses to convert the FII and other SAs – whether broad based or proprietary – will not need to convert to FPI, unless it is a proprietary SA that chooses to convert in which case all SAs and the FII will also need to convert.

— All existing FIIs and SAs are deemed eligible for FPI, even where the FII or SA does not meet the eligibility criteria. They may continue to deal until the expiration of the current registration. Upon that expiration, they may convert to FPI subject to payment of conversion and registration fees.

— SAs will be categorized into one of the three new categories based on its establishment, structure and constitution. The Multiple Investment Manager structure will still be valid allowing for multiple registrations. These accounts will be clubbed together for the purpose of investment limits and must be held with the same custodian.

— The requirement for a non fund FII to register a broad based fund will no longer apply.

Transition from QFI to FPI

— QFIs will be able to continuing buying, selling or dealing in securities for one year post the commencement of the regulation, that is 6th January 2015.

— Existing QFIs who are corporate bodies or individuals will fall under Cat III. If a QFI fulfills the requirements, they may obtain a Cat I or II status.

Eligibility of FPIs

— Private and merchant banks may be classified as Cat II and shall only be able to make proprietary investments.

— Every fund, sub fund and share class will need to separately fulfill the broad based criteria.

— Where a FPI applicant has a bank as an investor, it will qualify as broad based.

— NRIs cannot seek FPI status. Funds with NRIs as investors will not be prohibited from applying for FPI status.



An

n.

Exc

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ge

Turn

ove

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arke

t C

ap (

%)

0%

10%

20%

30%

40%

50%

60%


2012 2013 2014

Fig 1. Full year average - 2014: 39%, 2013: 36%, 2012: 35% Exchange Turnover in India is at its highest level compared to same period in the past two years.

Fig 2. Trading across asset classes picked up during the election season in India. Equity volumes were up 35% in April from Feb level.

Fig 3. Futures trading volumes were up 30% as well during the election, ahead of election results in India.

Fig 4. NSE market share continues to grow slowly and steadily as volumes shrink at BSE. Index volatility at its highest since October last year.


%

NSI 3% BSE 3%


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%


India

19


— Opaque structures may not apply for FPI, however, where the applicant is required by its regulator to ring fence assets and liabilities from other funds or sub funds, they may be able to apply if:

— The applicant is registered under the home jurisdiction.

— Each fund/sub fund satisfies the broad based investor criteria.

— The applicant undertakes to provide information on its beneficial owners when SEBI seeks the information.

Clubbing of Investment Limits

— Where the same end investor or set of end investors are constituents of 2 or more FPIs and have a beneficial ownership of more than 50% in those FPIs, the investment limits of the FPIs shall be clubbed at the threshold prescribed for a single FPI.

Offshore Derivative Instruments (“ODIs”)

— It is confirmed that the following can continue to subscribe or otherwise deal in ODIs:

— Those who have subscribed to an ODI under the FII regime will be able to continue to subscribe to ODIs. This applies even where the investor did not have a position prior to 7th January 2014.

— Cat I FPI clients.

— Insurance and reinsurance companies that are regulated or supervised by a relevant regulator in their foreign jurisdiction, in the same capacity as they propose to make investments in India.

— University funds, pension funds and university related endowments already registered by 31st May 2014, that are regulated or supervised by a relevant regulator in their foreign jurisdiction, in the same capacity as they propose to make investments in India.

— Sovereign wealth funds and foreign government bodies (including Foreign Central Banks and Governmental agencies, International or Multilateral organisation).

— Cat III clients are not able to invest in ODIs however, those with positions that pre date the FPI regulations commencement on 7th January, and those who were registered as clients but did not have positions on 7th January, can still subscribe to ODIs. This is still the case where there is a change in investment manager.

— Where an ODI subscriber is recategorised to Cat III, the subscriber may continue to hold existing positions but will not be able to renew or roll existing positions, or be issued with new ODIs.

Other topics covered in the FAQ include:

— Role and Responsibilities of Designated Depository Participant (“DDP”)

— Generation of FPI registration certificate

— Payment of Fees by FPI

— FPI Investments in Debt Securities

The FAQs document is accessible here:http://www.sebi.gov.in/cms/sebi_data/attachdocs/1398831315278.pdf

Source:http://www.business-standard.com/article/markets/sebi-extends-timline-to-implement-fpi-regulations-to-june-30-114032800807_1.html

http://www.mydigitalfc.com/news/fpis-get-breather-rbi-sebi-ease-kyc-compliance-process-658

http://www.thehindubusinessline.com/markets/sebi-sets-foreign-portfolio-investor-limit-of-10/article5962525.ece

Source: Dealogic




Mar

ket

Cap

(U

S$

tri

llio

n)

IPO

Vo

lum

e (U

S$

m)

66

67

68

69

70

71

72

73

74

75

76

0

5

10

15

20

25

30



Avg

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de

Siz

e

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read

(B

PS

)



0

100

200

300

400

500

600

0

1

2

3

4

5

6




-4

-2

0

2

4

6

8


%

Fig 6. Nifty Index has gained over 9% since elections started in India.

Fig 8. No IPOs in India amidst the volatile markets.

Fig 7. Sun Pharmaceuticals acquired Ranbaxy in a US$ 3.2Bn block deal on April 7. Stock is up 11% in the month of April.


Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

SUN.NS 11% 662,663,700 1.49 NMDC.NS 9% 112,117,000 0.97

SBI.NS 10% 1,253,812,000 1.21 MAHM.NS 7% 297,731,700 1.14

BRTI.NS 4% 418,972,900 0.89 KTKM.NS 5% 193,028,800 1.14

TAMO.NS 3% 575,349,900 0.80 LUPN.NS 5% 150,338,900 0.96

ICBK.NS 2% 1,301,992,000 1.01 REDY.NS 4% 319,276,400 1.31

HDBK.NS -2% 472,693,000 0.94 HLL.NS -6% 228,905,900 1.01

ITC.NS -3% 650,244,300 1.05 ASPN.NS -6% 125,944,800 0.92

INFY.NS -4% 1,151,142,000 1.03 ULTC.NS -6% 114,752,100 1.19

NTPC.NS -5% 240,378,900 1.01 BHEL.NS -7% 247,708,600 1.02

WIPR.NS -7% 390,049,800 1.32 BAJA.NS -7% 158,261,200 0.95



-6-5-4-3-2-101234


%


20


FPIs limited to 10% stake

SEBI meanwhile also announced that FPIs will be subject to a maximum holding limit of 10% of equity shares in an Indian company. FIIs that convert to FPI status that already holding shares in excess of 10% do not need to liquidate the holding but will not be allowed any fresh purchases until the current holding falls below the 10 percent limit.

Currently FIIs are allowed to hold up to 24% of the paid up capital of a company (except public sector banks where the limit is 20%).http://www.thehindubusinessline.com/markets/sebi-sets-foreign-portfolio-investor-limit-of-10/article5962525.ece

India signs Intergovernmental Agreement with the USA on Tax Evasion under FATCA

India and the US have concluded an “in substance” agreement to curb tax evasion by US entities through Indian Financial Markets. India will adhere to the Model 1 Intergovernmental Agreement under FATCA where by Indian financial entities will be required to report information on US account holders to the US IRS (Internal Revenue Service) through CBDT (Central Board of Direct Taxes).

SEBI, in consultation with the Ministry of Finance, has examined the applicability of the provisions under FATCA to all market intermediaries and will be issuing appropriate guidelines soon. The provisions will be effective from 1st July 2014. SEBI might come up with value based compliance requirements - accounts of government entities and central banks, along with retirement funds, are likely to be given an exemption.

A non-compliance with FATCA would attract 30% withholding tax on certain US source payments.http://www.business-standard.com/article/markets/sebi-s-draft-fatca-norms-greater-scrutiny-ahead-for-high-value-us-accounts-114042300932_1.html

http://www.financialexpress.com/news/india-concludes-pact-with-us-on-tax-evasion-under-fatca/1242863

SEBI to revise fees charged to market intermediaries for various services

The SEBI board in its board meeting on 20th March 2014 has approved the proposal for upward revision of fees chargeable to various market intermediaries and participants based on recommendations by the Committee on Rationalization of Financial Resources (“CRFR”). The board also approved the budget for the financial year 2014-2015 and decided on the major focus areas and objectives.

SEBI has identified market surveillance and fraud detection as a major focus area and will be investing significant resource to improve it s capabilities on that front. SEBI will also be undertaking a study of the market intelligence infrastructure and techniques employed by the regulators in developed markets such as the US, UK, Australia and Hong Kong.

The SEBI release can be accessed here: http://www.sebi.gov.in/sebiweb/home/document_detail.jsp?link=http://www.sebi.gov.in/cms/sebi_data/docfiles/27621_t.html

Sourcehttp://economictimes.indiatimes.com/markets/regulation/sebi-gets-board-nod-for-fee-hike-budget-for-next-fiscal/articleshow/32374308.cms

http://economictimes.indiatimes.com/markets/regulation/sebi-to-study-surveillance-systems-in-overseas-markets/articleshow/32955496.cms

http://timesofindia.indiatimes.com/business/india-business/Sebi-gets-new-software-tools-for-fraud-detection/articleshow/33326741.cms

SEBI issues Corporate Governance guidelines for listed companies

In a bid to strengthen the Corporate Governance norms in the country and to align them to the new Companies Act whilst encouraging listed companies to follow best practices on corporate governance, SEBI issued detailed guidelines on the subject for the market participants. The new rules will come into effect from 1st October 2014.

Below are the main areas which are clarified.

— Eligibility and tenure for Independent Directors

— Transparency in performance evaluation of the Board of Directors (including independent directors) and remuneration policies

— Requirement to have at least one female director on the board

— Mandatory constitution of Audit Committee with an Expanded role

— Prior approval of Audit Committee for all material Related Party Transactions (“RPTs”)

— Constitution of Stakeholders Relationship Committee and

— Compulsory implementation of a whistle blower mechanism

SEBI also directed all listed companies to follow a prescribed standard format for their Auditor Certificates, which need to be mandatorily filed to seek approval for any merger, demerger and restructuring schemes.

The SEBI releases can be accessed here: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1397734478112.pdf,

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1395745810782.pdf

Sourcehttp://www.deccanherald.com/content/400046/sebi-issues-detailed-corp-governance.html

http://www.thehindubusinessline.com/markets/auditor-certificates-sebi-asks-listed-cos-to-follow-standard-format/article5830943.ece

SEBI revises Mutual Fund disclosure norms

SEBI board had earlier announced a long term policy aimed at providing a boost to the Mutual Fund industry. Additionally the disclosure requirements for the mutual funds have also been raised. Mutual funds are now required to disclose

— ‘Monthly Average Asset Under Management’ (Monthly AAUM) instead of AUM on a monthly basis on their website and also provide the same to the Association of Mutual Funds in India (AMFI) within 7 days of the month-end

— Monthly AAUM under various categories (from different categories of schemes, from places beyond top-15 cities, contribution of sponsor and its associates etc) on a monthly basis

Source: Dealogic



0% 5% 10% 15% 20% 25% 30% 35%

Auto/Truck


Consumer

FIG

Industrials

M&M

TMT




Jan-14 4 6% 10% 1%

Feb-14 6 20% 6% 4%

Mar-14 3 13% 31% 26%

Source: Dealogic


21


— Voting data against their voting rights in the investee companies along with rationale supporting their decision (for, against or abstain) on a quarterly basis

The SEBI release can be accessed here - http://www.sebi.gov.in/cms/sebi_data/attachdocs/1396436217250.pdf

http://www.sebi.gov.in/cms/sebi_data/pdffiles/27383_t.pdf

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1395658919125.pdf

Sourcehttp://www.domain-b.com/investments/funds/20140326_proposes.html

http://www.business-standard.com/article/markets/mfs-to-disclose-average-aum-on-monthly-basis-sebi-114040300039_1.html

http://freepressjournal.in/amfis-arm-gets-sebi-nod-to-act-as-sro-for-distributors/

SEBI unveils revised guidelines for Liquidity Enhancement Schemes

SEBI has issued revised guidelines for governing the Liquidity Enhancement Schemes (“LES”) offered by stock exchanges to enhance liquidity in illiquid securities traded in the equity derivatives and equity cash segments on their platform. Below are the revised guidelines.

— The LES can be offered on any security for a maximum period of three years and shall have the prior approval of the Stock Exchange’s Board

— The incentives under the LES shall be transparent and measurable and shall not compromise market integrity

— The eligibility criterion for securities to be a part of the LES can be decided by the stock exchange independently

— The implementation and outcome of the LES shall be monitored by the Board quarterly

— The effectiveness of the scheme shall be reviewed by the stock exchange and the same shall be reported to SEBI every six months

Exchanges are directed to put all systems in place to implement these guidelines and also disseminate these provisions to all market participants.

The SEBI notification can be accessed here: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1398253214295.pdf

Source http://www.business-standard.com/article/markets/sebi-revises-norms-for-liquidity-enhancement-schemes-114042301182_1.html

Venue Updates

P-Note investments surge ahead, Indices breach all-time highs

Foreign portfolio investment into Indian securities through participatory notes (P-notes) witnessed a surge in March this year when the total investments through this route reached Rs 2.07 lakh crore (over USD 34 bn). This was the highest level in the past three years since May 2011. In March, Indian markets rallied six per cent, led by robust foreign fund inflows. Continued strong FII inflows in April lead the benchmark indices BSE Sensex and NSE Nifty to reach their lifetime high levels on April 23 (expiry day of April derivative contracts), the NSE Nifty reached a closing high of 6840.8 while the BSE S&P Sensex touched a record high of 22912.5 before closing at 22876.5http://www.business-standard.com/article/markets/p-note-assets-jump-20-in-march-114041800799_1.html

http://www.financialexpress.com/news/bse-sensex-rises-to-record-staterun-banks-extend-rally-on-new-basel-deadline/1236480

http://zeenews.india.com/business/news/finance/nifty-hits-new-record-high-on-hectic-buying_98289.html

http://www.smetimes.in/smetimes/news/indian-economy-news/2014/Apr/23/stock-markets630923.html

BSE launches Equity segment on a new trading platform; hit by glitches

On 7th April, the Bombay Stock Exchange (“BSE”) in partnership with Deutsche Boerse, launched its equity cash segment for trading on its new ‘Bolt Plus’ platform which offers a response time of 200 micro seconds making it the fastest trading platform in the country. BSE will further reduce the trading speed to 20 micro seconds with capability to handle 5 lakh orders per second in the next three years.

The trading on BSE was however briefly halted in the morning session for two days in succession due to a software glitch which prevented the share prices on the exchange from updating for about 15-20 minutes.

“Minor teething troubles were seen by a few participants during the opening session in the morning, which have been identified and rectification put into motion. We believe the system of various participants will stabilise over a few days in terms of their integration with the BSE’s new trading platform,” the BSE stated.http://www.business-standard.com/article/pti-stories/bse-launches-equity-trading-on-bolt-plus-platform-114040701172_1.html

http://www.businessweek.com/news/2014-04-09/india-s-bse-trading-system-snag-delays-orders-for-second-day

NSE strengthens Risk Management for Futures & Options

The NSE on 11th April issued guidelines advising the reference price and execution range that will apply to all incoming orders of the mid and far month futures and options contracts. The orders will be matched against the set criteria and cancelled if found to be breaching the said limits. These limits are currently not applicable to India VIX futures and long term option contracts but may be extended to all contracts in future. Under the new rules which became effective on 5th May:

— Reference price for each contract shall be computed as follows

— At market open – it shall be the theoretical price based on the underlying price

— During trading hours – it shall be the simple average of trade prices of that contract in the last 5 minutes

— For contracts that have traded in the last 5 minutes, the reference price shall be revised throughout the day on a rolling basis at 1 minute intervals

— For all other contracts the reference price shall be the theoretical price based on the latest available underlying price and shall be revised throughout the day at 30 minute intervals

— Execution range is the range on both sides of the reference price as given below

Segment Reference Price (Rs.)

% of Reference Price

Minimum absolute Range (Rs.)

Futures All 5% -

Options 0.05 to 25 - 5

25.05 to 100 20% 10

>100 10% 20 NSE circulars for the launch can be accessed here: http://www.nseindia.com/content/circulars/FAOP26439.pdf

http://profit.ndtv.com/news/market/article-nse-releases-new-guidelines-for-futures-and-options-385346

http://www.business-standard.com/article/markets/nse-may-extend-scope-of-freak-trade-limits-on-derivatives-114042200994_1.html

NSE to transfer more stocks to restricted categories

22


The NSE through a series of notifications have notified the lists of stocks that have been transferred to the restricted (Trade-to-Trade) category where speculative trading is not allowed and delivery of the shares is mandatory. The action has been taken after these stocks were identified in surveillance reviews conducted by the bourses as per directions from SEBI. NSE has moved a total of 47 scrips to the ‘T’ category.http://www.moneycontrol.com/news/market-news/nse-to-shift-stocks47-cos-to-restricted-trading-segment_1065811.html

BSE in talks to acquire USE

The BSE is reported to be in preliminary talks with United Stock Exchange (“USE”) to acquire the loss making exchange which offers trading in currency futures. BSE is already a strategic partner and single largest shareholder in USE with 15% as of 31st December 2013.http://www.domain-b.com/investments/markets/bse/20140324_stock.html

Personnel Updates

R Gandhi appointed as RBI deputy governor

The Reserve Bank of India announced the appointment of Mr R Gandhi as its Deputy Governor for a tenure of three years on 3rd April 2014. He has been with the RBI since 1980 and has worked across various departments.

In his new role he will be responsible for the portfolios of the department of banking operations and development, department of non-banking supervision, urban banks department, department of expenditure and budgetary control, department of information technology, legal department, premises department and risk monitoring department.http://www.domain-b.com/people/in_the_news/20140405_gandhi.html

Contact


23

Global Market Structure South Korea


Global Market Structure South Korea Newsletter Issue 33, 2014

Market Structure

FSC to relax IPO listing requirements

In order to improve local corporate funding environment and boost IPOs, The Financial Services Commission (“FSC”) said it will remove hurdles to stock listings and ease rules on filing and disclosing corporate financial information without hurting the interests of investors.

The FSC plans to reorganise workings of KOSDAQ and KONEX in a way such that listed companies can raise capital and cash out their investment.

FSC said that KOSDAQ, the country’s secondary bourse, will be transformed into a tech-focused venture market with loosened regulations. Per new rules, companies with high-end technology and growth potential can be listed on KOSDAQ with less strict requirements on financial status and management.

While venture-focused KONEX will provide ground to start-ups to become KOSDAQ-listed firms, said FSC.

These measures are being introduced after only 3 new companies were listed last year. The local IPO market has contracted significantly in recent years, some feel this is due to stricter regulations on investor protection and a tightened screening process for listing.

MSCI may include Korea on its list of developed markets

Local experts believe that Morgan Stanley Capital International (MSCI), may include Korea on its list of developed markets this year. They may however face tough competition from US, Western Europe, Japan and other developed regions in drawing funds from investors.

The Korean Exchange has asked MSCI to include Korea’s stock market, including its benchmark KOSPI, in its index for developed economies since 2009.

Venue News

Change to minimum lot size on KOSPI

As of 2nd June, changes will apply to the minimum trading lot size for shares as follows.

Product Before After

Minimum trading lot size - Shares

10 shares minimum where base price is less that KRW 50,000

1 share where base price is more than KRW 50,000

1 share

Block trading limits

500 times minimum trading lot size

5,000 times minimum trading lot size



An

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2012 2013 2014

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EQUITY FUTURES ETFS

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Fig 2. Overall trading volumes in Korea have been low this year. Declining derivatives volumes put pressure on equities market as well.

Fig 3. Kospi futures face tough competition from Japan and China as both local and foreign investors find it more and more difficult to trade Korean derivatives with stricter regulation.

Fig 4. South Korea has the smallest average trade sizes across markets in APAC


%


KSC 2.8% KOE 2.8%

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24

Global Market Structure South Korea

KRX signed Uzbek Stock Market Modernisation Project

Korea Exchange(“KRX”) signed an agreement on “Uzbek Stock Market Modernization Project” with the State Property Committee(“SPC”) of Uzbekistan at Tashkent, Uzbekistan. The agreement was signed by KRX Chairman and SPC Chairman and includes detailed plans on modernisation of the Uzbekistan stock market.

The Master agreement was signed in 2011 between the two parties but actual work was prolonged due to negotiation on details of the agreement’s terms and conditions. KRX expects to begin specific tasks for the project to commence soon and expects the delivery of the new system by year-end 2015.


Avg

Tra

de

Siz

e

Avg

Sp

read

(B

PS

)



0

20

40

60

80

100

120

0

5

10

15

20

25

30

35




-5-4-3-2-10123456


%

Fig 5. Kolon industries won the federal court case against Dupont in trade-secrets case involving Kelvar, the company’s fiber used in bulletproof vests. Dupont is to pay US$ 920Mn in damages.


Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

030200.KS 11% 1,258,514,000 1.59 120110.KS 28% 210,090,200 2.08

047040.KS 9% 146,008,200 0.73 108670.KS 12% 212,518,400 1.04

029780.KS 9% 92,404,670 0.94 003620.KS 11% 197,156,500 2.05

000660.KS 9% 2,553,383,000 0.82 011070.KS 9% 349,045,600 1.28

021240.KS 7% 360,003,800 1.24 049770.KS 9% 25,636,090 0.83

042660.KS -9% 632,662,300 0.87 042670.KS -10% 323,926,600 0.66

009540.KS -9% 969,832,000 1.06 097230.KS -12% 148,966,200 1.18

002380.KS -10% 319,897,300 1.44 003490.KS -13% 333,438,800 1.12

010140.KS -11% 1,281,635,000 1.23 004000.KS -14% 103,259,500 1.11

011170.KS -16% 644,590,700 0.90 017800.KS -14% 177,438,000 1.04


Source: Dealogic



IPO

Vo

lum

e (U

S$

m)

980

990

1000

1010

1020

1030

1040

1050

0

50

100

150

200

250

300



M

arke

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ap (

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on

)

Fig 7. BGF Retail was the only IPO in Korea after 2 months. US$ 244Mn, retail sector IPO is the biggest of the year so far.

Source: Dealogic



0% 20% 40% 60% 80% 100%

Consumer

REGAL

TMT



Source: Dealogic



Jan-14 2 108% 194% 171%

Feb-14 1 - - -

Mar-14 - - - -

Apr-14 1 - - -

Sources:www..eng.krx.co.krwww.english.yonhapnews.co.krwww.koreatimes.co.krwww.businesskorea.co.kr

Contact


25

Global Market Structure Australia


Global Market Structure Australia Newsletter Issue 33, 2014



An

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Market Structure

ASIC responds to HFT media and Flash Boys - Market supervision update Issue 45, April 2014

The Australian Securities and Investments Commission (“ASIC”) has responded to the recent media attention relating to high-frequency trading in the United States generated by Michael Lewis for the release of his new novel titled “Flash Boys”. In its market supervision update, ASIC rejects the suggestion that HFT is a problem within the Australian equities market, stating that “any suggestion that high-frequency trading is pervasive in Australia is simply not supported by the evidence.” Elmer Funke Kupper, ASX Ltd chief executive agrees concerns about high-frequency trading in the US should not be compared to the Australian market.

“The regulatory settings and the market structure in Australia are materially different than in the United States,” Elmer Funke Kupper told the Macquarie Australia Conference.

ASIC Guidance on new regulatory data requirements

As detailed in the Market Supervision update Issue 44, March 2014, ASIC has published an FAQ on the regulatory data requirements that come into effect from 28th July. From that date, market participants will be required to provide to a market operator a number of fields including:

— Execution venue. These should be linked to the list of ‘crossing system IDs’ published on the ASIC website. The ID will be required for off order book transactions, the guidance provides examples of when such an ID will be required.

— Capacity of participant. Clarification is given on the use of ‘principal’ and ‘agency’, or as both principal and agent. Hedging of delta 1 products is considered to be a principal activity.

— Origin of order or transaction. Participants should take all reasonable steps to identify the ultimate originator and to ensure consistency in the use of identifiers. In cases where it is not practical or reasonable to determine the ultimate originator, the participant should use an ID as close to that originator as possible.

To access the full list of data requirements and the FAQs, click here:http://www.asic.gov.au/asic/asic.nsf/byheadline/ASIC-Market-Supervision-Update-Issue-44?openDocument

Venue Updates

ASX Introduction of reduced ex period and effective date for revised ASX Listing Rule changes

On 14th April, ASX revised ASX Listing Rule changes dealing with new rights issue timetables (including a shortened ex period on corporate actions) and the Dividend Reinvestment Plan election date rule. The changes are intended to improve the efficiency and flexibility of its capital raising mechanisms and further strengthen the Australian equities market.


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1800

0

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4

6

8

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ASX 0.93% ChiX 0.93%


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Feb-12 May-12 Aug-12 Nov-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Fig. 3 – Chi-X in Australia has sustained its market share despite growing competition from exchange crossing venue.




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$3

$4

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Fig 2. Equities turnover in Australia slowed down in March and April as prices for iron ore weakened to 18-month low and exports fell. ASX futures trading at steady volume despite slowdown in equities reflects general optimism in the market.

Australia

26

Global Market Structure Australia

Equity Derivatives – Launch of new ASX ETO Margin Calculator

The new ETO Margin Calculator is now available on the ASX website for ASX Participants and ETO users. The new ETO Margin Calculator provides investors with up to date pricing by using the CME SPAN Algorithm and connecting directly to the ASX Clear margining engine. Users also have the ability to bulk upload ETO portfolios using a formatted CSV file.

To access the calculator click here:

http://www.asx.com.au/prices/margin-estimator.htm

ASX Trading Statistics April 2014

The revenue growth backdrop for ASX is looking increasingly tough in 2H14 as SFE volumes and equity turnover slow and capital raisings struggle to match 1H14. In April, cash equity turnover averaged A$3.74bn/day for ASX, down 14% on the previous corresponding period.

ASX’s share of equity trading has remained relatively stable through FY14 at around 87%.



-4-202468

1012141618


%

Source: Dealogic



IPO

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S$

m)

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100

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Mar

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1.26

1.28

1.30

1.32

1.34

1.36

1.38

Fig 7. There were a five new listings over past two months, but none average to the same monthly IPO size average seen last year. Biggest listing of the five was Japara Healthcare at US$ 323Mn.

Source: Dealogic



0% 20% 40% 60% 80% 100%

Auto/Truck

Consumer

Healthcare

M&M

REGAL



-4-202468

1012141618


%


Stock Price Return

Volume traded (US$)

20D/ 100D ADT

Stock Price Return

Volume traded (US$)

20D/ 100D ADT

TEL.AX 13% 121,208,200 1.40 DJS.AX 28% 462,436,700 1.78

RMD.AX 12% 571,333,900 0.98 EGP.AX 14% 278,555,400 1.51

WOR.AX 12% 364,068,900 0.95 QAN.AX 10% 150,604,000 0.55

LLC.AX 8% 579,245,100 1.18 AWC.AX 10% 383,071,100 1.11

DXS.AX 8% 338,646,700 0.69 CGF.AX 9% 241,261,500 0.99

TPM.AX -7% 298,650,000 1.57 MFG.AX -8% 143,187,400 1.07

LEI.AX -9% 267,826,700 0.52 ARI.AX -11% 337,476,600 1.38

QBE.AX -9% 1,121,480,000 0.76 WHC.AX -11% 88,475,980 0.74

ILU.AX -11% 524,758,300 1.28 PTM.AX -12% 158,818,500 1.45

CCL.AX -16% 891,102,800 1.65 MSB.AX -12% 57,922,110 1.29

Fig 6. Coca-Cola shares fell 15% after Citi analyst downgraded the stock on the back of earnings published in March.




Source: Dealogic



Jan-14 1 - 18% 103%

Feb-14 2 19% 47% 7%

Mar-14 3 23% - 26%

Apr-14 2 35% - 26%

Contact


Sources:www.asic.gov.au

www.asx.com.au

www.chi-x.com.au

www.smh.com.au

27

Global Market Structure Thailand


Global Market Structure Thailand Newsletter Issue 33, 2014

Market Structure

Joint consultation on Asia Region Funds Passport released

Australia, Korea, New Zealand, Philippines, Singapore and Thailand released a joint consultation paper on the proposed rules and arrangements to govern the operation of the Asia Region Funds Passport (“ARFP”) which aims to facilitate fund managers operating in a passport member economy to offer their funds in other passport member economies under a streamlined authorisation process. Major objectives of the Regional Funds Passport are:

— Increase the number regional Collective Investment Schemes (“CIS”) being offered in each member economy while ensuring Regulatory Consistency and adherence of local rules in each member state

— Achieving greater efficiencies and economies of scale by encouraging increased competition in each member state and passing the benefits to investors

— Increase the diversity of CIS available to investors in member states by encouraging foreign regulated CIS to operate through the funds passport

— The combined expertise of multiple regulatory agencies promoting sharing of strong regulatory practices will also have a broader influence on the regulation of CIS in the region and will offer enhanced investor protection in all member states.

— The passport will have broader economic benefits by improving liquidity and access to finance across the region and will help in deepening the regional financial markets

— One of the key objectives is to ensure that economies can continue to maintain financial system stability and efficiency. Keeping capital flows within the region will help to strengthen the region’s resilience to external shocks and volatility

Comments can be submitted by 11th July, the consultation paper is available here: http://fundspassport.apec.org/files/2014/04/20140411-Consultation-Paper-on-the-Passport-Arrangements-FINAL.pdf

Thailand enters into regulatory cooperation pact with Cambodia

The Securities and Exchange Commission of Thailand and the Securities and Exchange Commission of Cambodia have signed a memorandum of understanding (“MoU”) bolstering regulatory cooperation between the neighbouring markets. The two countries will be sharing information on daily trends, trades and general market information according to the agreement.

Source: Dealogic


IPO

Vo

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e (U

S$

m)

0

100

200

300

400

500

600



M

arke

t C

ap (

US

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14.6

14.8

15.0

15.2

15.4

15.6

15.8

16.0

16.2

16.4

Fig 1. Thai equities market is starting to gain back its market share after a period of political unrest since October last year. Central bank of Thailand forecasts an economic growth of under 3% for a second consecutive year.

Fig 2. New listings also picked up in Thailand with 4 IPOs in April. Kaset Thai International Sugar (KTIS) was the biggest of the four sized at US$ 297Mn.

Source: Dealogic



0% 20% 40% 60% 80% 100%

Auto/Truck


Consumer

FIG

TMT



Source: Dealogic



Jan-14 - - - -

Feb-14 1 38% 3% 27%

Mar-14 3 28% 16% 23%

Apr-14 4 11% - 19%



EQUITY FUTURES ETFS

E

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$2.0


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28

Global Market Structure Thailand

Venue News

SET ties up with Deutsche Boerse

The Stock Exchange of Thailand (“SET”) has signed a MoU with the German exchange operator Deutsche Boerse AG to facilitate the development of securities and derivatives markets between the two partners. The agreement would allow Thai equity products such as market index and exchange traded fund (“ETF”) to trade on the European bourse, enhancing the visibility of Thai products and vice versa.

TFEX launches new trading and clearing systems; Mini SET50 futures launch on 6th May

TFEX, under the SET group, announced the successful launch of its new derivatives trading and clearing systems, operating on the SET CONNECT platform. Developed by Korea Exchange, the new systems provide cross-asset class trading efficiently and support multi-currency and multi-market trading.

“This development is part of SET’s three-year strategy (2014-2016) aiming to boost efficiency of its infrastructure in connecting to global capital markets, thus strengthening its capabilities. It will also increase SET’s international competitiveness among the world’s leading stock exchanges, as well as supporting future expansions of the Thai capital market.” SET and TFEX Chairman Sathit Limpongpan said.

TFEX launched the mini-SET50 Futures on 6th May with a contract size one-fifth that of the SET50 futures (reduced from THB 1000 to THB 200). Margins and exchange fees have been reduced proportionally to one-fifth as well. The multiplier of SET50 Index Futures has been reduced from THB 1,000 to THB 200 and all open positions prior to that date will be automatically increased by five times. All other contract specifications remain the same as SET50 Futures.

Further contract details can be found here: http://www.tfex.co.th/en/products/set50futures-spec.html,

http://www.tfex.co.th/en/products/files/mini_S50FUT_EN_201404.pdf

Personnel Moves

SET appoints Kesara Manchusree as its 12th president

The SET has announced the appointment of Ms. Kesara Manchusree as the exchange’s twelfth president with a four-year term running from 1st June, 2014 to 31st May, 2018. Kesara will succeed SET’s current president, Charamporn Jotikasthira, whose tenure ends on 31st May, 2014.

Kesara joined SET in 2003 and has worked in several departments including marketing, derivatives development and money market development. Her current position is Executive Vice President and Head of Market Division. Kesara is also Managing Director of the Thailand Futures Exchange PCL and a director of Settrade.com Co., Ltd.

The SET board appointed Kesara on the basis of her strong expertise in the financial industry and the capital market, including derivatives market, with her visionary leadership to develop SET sustainably at international level, in line with SET’s broad policy.

Contact


Sources:http://www.marketwatch.com

http://www.bangkokpost.com

https://www.asia-first.com

http://online.wsj.com

http://www.nationmultimedia.com

http://www.phnompenhpost.com

29

Global Market Structure SIngapore


Global Market Structure Singapore Newsletter Issue 33, 2014



EQUITY FUTURES ETFS

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Market Structure

Singapore signs Intergovernmental Agreement with the USA on Tax Evasion under FATCA

Singapore and the US have concluded discussions to curb tax evasion by US entities through Singapore Financial Markets. Singapore will follow the Model 1 Intergovernmental Agreement under FATCA where by Singapore based financial entities will be required to report information on US accountc holders to the US IRS (“Internal Revenue Service”) through the Inland Revenue Authority of Singapore (“IRAS”).

Both parties expect to formally sign the agreement in the second half of 2014. Singapore-based financial institutions will have until 31st December 2014 to register as a Foreign Financial Institution within a Model 1 IGA jurisdiction and obtain a Global Intermediary Identification Number at the US IRS’ online FATCA registration portal. This will ensure that there is no FATCA-related withholding tax on payments made to them from the US.

MAS and Brunei enter into Regulatory Cooperation agreement

The Monetary Authority of Singapore (“MAS”) and Autoriti Monetari Brunei Darussalam (“AMBD”) have signed a Memorandum of Understanding (“MOU”) to boost cooperation on capital market development, which will boost financial services ties between the territories. MAS and AMBD will be exchanging views and best practices on monetary policy management and operations, human resources, information technologies, banking supervision, and payment and settlement services as part of the arrangement.

Venue News

April 2014 SGX performance snapshot

SGX reported securities activities increased from March but were down year-on-year while derivatives trading volumes declined. Major highlights below:

— Total value of securities traded was $25.8 billion, down 17% compared to last year

— Securities daily average value (“SDAV”) declined to $1.2 billion down 13% year-on-year

— Derivatives volume declined 13% year-on-year to 8.5 million contracts

— Open interest at end-April rose 3% from a year earlier to 3.3 million contracts

— China A50 futures volume rose 31% to 2.1 million contracts

— MSCI Taiwan futures trading fell 2% to 1.5 million contracts

— Nikkei 225 futures volumes fell 54% to 1.8 million contracts

— The MSCI Indonesia futures volume more than doubled to 23,916 contracts

— Indian Nifty futures trading increased 12% to 1.5 million contracts

— A total of $6.7 billion of OTC Interest Rate Swaps were cleared, down 4% year-on-year

Source: Dealogic



IPO

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3.01

3.02

3.03

3.04

3.05

3.06

3.07

Fig 2. Oil and Gas sector leads the new IPOs in the year so far. PACC Offshore Service Holdings (POSH), the biggest listing in Singapore this year in April, is currently trading at a premium to its IPO price.

Fig 1. Trading in Singapore equities strengthened in March and April as geopolitical tensions in Ukraine eased off and US consumer confidence rose more than expected.

Source: Dealogic


0% 20% 40% 60% 80% 100%

Auto/Truck

Healthcare

Oil & Gas

REGAL

Source: Dealogic


Source: Dealogic



Jan-14 4 85% 82% 91%

Feb-14 - - - -

Mar-14 - - - -

Apr-14 2 11% - 7%

Singapore

30

Global Market Structure SIngapore

Contact


Sources:http://www.ft.com

http://www.tax-news.com

http://sbr.com.sg

http://www.channelnewsasia.com

http://www.legalbusinessonline.com

http://www.automatedtrader.net

http://www.todayonline.com

http://www.reuters.com

http://www.theasset.com

http://www.shanghaidaily.com

http://www.hedgeweek.com

http://www.businessweek.com

SGX also announced its third quarter financial results. Net profit for the quarter declined 22% year on year to SG$76 mn while total revenues were down 13% at SG$166mn.

SGX will launch options on China A50 futures in Q3 2014

The Singapore Exchange (“SGX”) has announced its plans to launch SGX options on the SGX FTSE China A50 Index futures (SGX China A50 futures) in the third quarter of 2014 to cater to the risk management needs of global investors.

“The introduction of the SGX China A50 index options is timely as offshore interest in the China A-share market has picked up substantially and hedging needs from institutional investors and asset managers have become more acute and sophisticated. With the options, our customers will be able to realise and enjoy more trading opportunities and capital savings through portfolio margining” said Michael Syn, Head of Derivatives, SGX.

SGX introduces new order types

SGX has introduced new order types in the market effective 31st March. These will be available to the traders throughout the trading session and include

— Price triggered orders (instructions which are converted into actual orders in the order book once the target price is reached)

— Stop orders (typically used to minimise a loss or protect a profit on an existing position)

— If-touched orders (provide flexibility to buy and sell at specific price levels)

Additionally, making market orders and market-to-limit orders which were previously available only during the market opening and closing routines have been made available throughout the session.

Revised SGX securities market fees to be effective from 1st June

SGX has revised the fees applicable for clearing and depository services and the new schedule will come into effect from 1st June 2014. The clearing fee will be reduced by one-fifth from 0.04% to 0.0325% of contract value. The cap of S$600 on this fee for contracts of S$1.5 million or more will be removed.

Transfers and onward settlement fees, which are mainly levied on brokers and depository agents, will be revised to encourage on-exchange trades. It is hoped the move will increase transparency and liquidity, and consequently improve price discovery in the market. Transfers and onward settlements pursuant to on-exchange trades will be charged a fee of S$30 and transfers and settlements pursuant to off-exchange trades will be charged a fee of 0.015% of the value of the transaction, subject to a minimum of S$75.

SGX will also be introducing incentive schemes to attract more market makers to participate in the securities markets and help improve the market liquidity.

Before 1 June 2014 From 1 June 2014

Trading Fee 0.0075% of contract value

No change

Clearing Fee 0.04% of contract value, subject to a maximum of S$600

0.0325% of contract value

Liquidity programmes

Not available for cash equity securities

Available for market makers liquidity providers schemes

Transfers and onward settlement fees

No differentiation between on and off-exchange transactions

Fees related to on-exchange trades will be lower than off-exchange trades

31

Global Market Structure Philippines


Global Market Structure Philippines Newsletter Issue 33, 2014

Market Structure

Deutsche Bank to provide Custody and Settlement Services for the ASEAN Trading Link

In a milestone agreement towards achieving an integrated market place, the ASEAN Exchanges have selected Deutsche Bank for providing Custody and Settlement services on the ASEAN Trading Link (“ATL”). The announcement was made after the ASEAN Exchanges CEOs meeting in Indonesia early April. This enables the ASEAN Exchanges to provide streamlined and cost-effective post-trade procedures for cross-border transactions conducted through the ATL.

“ASEAN Exchanges have made significant progress in meeting several key milestones in our effort to promote the integration of the ASEAN capital market. We will continue to focus on driving cross border collaboration, streamlining access to ASEAN, creating ASEAN-centric products, and implementing targeted promotional initiatives” said Ito Warsito, CEO, IDX.

ASEAN Exchanges to jointly launch an Index

Seven members of the ASEAN Exchanges have agreed to develop and launch the ASEAN/FTSE Index, with 180 constituents in a bid to encourage larger investments into the region from both regional and global investors. The index will include the top 30 companies by market capitalisation from each of the member exchanges - the Indonesia Stock Exchange (“IDX”), Philippine Stock Exchange (“PSE”), Singapore Exchange (“SGX”), Bursa Malaysia (“KLSE”), Stock Exchange of Thailand (“SET”), Ho Chi Minh City Stock Exchange (“HOSE”) and Hanoi Stock Exchange (“HNX”). The Index will be launched in Indonesia.

“It marks the first collaboration of ASEAN stock markets in providing comprehensive information to investors to attract global funds and institutions” SET president Charamporn Jotikasthira said.

Venue News

PSE reaches 9-month high levels

The Philippine Stock Exchange (“PSE”) on 22nd April breached the 6800 mark and peaked at 6815 points before closing at 6784.9 points, its highest close since 25th July, 2013. The markets are in a bullish mode supported by the Bangko Sentral ng Pilipinas maintaining inflation targets, thus a low inflation environment.

Shariah compliant companies list expands

The PSE now has an expanded the list of 60 Shariah-compliant companies (compared to 47 in Dec 2013) listed on its platform providing more investment opportunities to the Islamic investors. The PSE uses the services of IdealRatings Inc. to screen the listed companies in accordance with the Accounting and Auditing Organization for Islamic Finance Institutions. The release of Shariah complaint firms is seen as prelude to the exchange’s plans of launching an Islamic sub-index later this year.

PSE launches mobile disclosure application

The PSE has launched a free mobile application called the Electronic Disclosure Generation Technology (“EDGE”) linked to its new disclosure system which enables users to get real time access to disclosures released by companies.

“It is a “big game changer” that places the local bourse ahead of its counterparts in the region. It gives a complete environment, a bigger suite of services to end users. Over time, this will help increase not only interest in the stock market but hopefully bring about a culture of improved and increased transparency by our stakeholders.” PSE President and CEO, Hans B. Sicat said.

The PSE will also launch a new mobile application for the PSETradex, the bourse’s online trading platform for brokers by the end of June 2014.



EQUITY

Eq

uit

ies

& F

utu

res

(U

S$

Bill

ion

s)

$0.0

$0.1

$0.2

$0.3

$0.4


Sources:http://www.interaksyon.com

http://www.bworldonline.com

http://manilastandardtoday.com

http://www.themalaymailonline.com

http://www.interaksyon.com

Philippines

Contact


Fig 1. Philippines stock exchange index gained nearly 6% in March and April but overall trading volumes are still lower than same period last year.

32

Global Market Structure Indonesia


Global Market Structure Indonesia Newsletter Issue 33, 2014

Market Structure

IDX to roll out XBRL based reporting in early 2015

The Indonesia Stock Exchange (“IDX”) is aiming to implement Extensible Business Reporting Language (XBRL) based financial reporting in the beginning of 2015. XBRL is an electronic communication language which is used universally for business information exchanges and transmissions as it has standardized format across countries and languages.

“We believe Indonesia is an extraordinary market, however, obstacles impeding access to information can significantly reduce its attractiveness to investors. With the advantages offered by XBRL, including its standardization, investors can be more confident when investing in Indonesia. The system would also enhance the transaction monitoring capabilities for IDX as well as Regulators” said Hoesein, Corporate Listing Director at IDX.

30 listings expected in 2014

The IDX has stated it is confident that 30 or more companies will be able to list during this year, equaling the listings in 2013. 17 companies are due to list in the first half of the year with an equally strong pipeline in place for the rest of the year.

Sources: http://business.inquirer.net

http://www.marketwatch.com

http://www.businessmirror.com

http://www.indonesia-investments.com

http://www.thejakartapost.com



F

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res

(U

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Eq

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Indonesia

Fig 1. Indonesian equities markets rallied in March after the nomination of Jojo Widodo as a presidential candidate for this year. Widodo was nominated as the candidate for current main opposition PDI-P party. Upcoming presidential election in Indonesia this July may spike volatility in the local market.

33

Global Market Structure Malaysia


Global Market Structure Malaysia Newsletter Issue 33, 2014

Market Structure

SC releases guidelines on compliance function for fund management companies

The Securities Commission, Malaysia has released updated guidelines for the Compliance function at Fund Management companies. The new guidelines have an added paragraph with directions related to

— Islamic Fund Management;

— Prevention of Money Laundering and Terrorism Financing for Capital Market Intermediaries; and

— Applicable provisions provided in the CMSA and all other relevant guidelines including the Licensing Handbook

The complete guidelines can be accessed here:http://www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/FundManagers/GuidelinesFundManager14.pdf

Venue News

Bursa Malaysia announces rise in profits for Q1 2014

Bursa Malaysia announced a rise of 13% in its pre-tax profit for Q1 2014 to RM62.9 million (US$ 19.3mn). Revenues also grew 11% to RM123.2 million (US$ 37.7mn) compared to the same period last year on the back of double-digit growth in trades from the securities and derivatives market. The Average Daily Volume in the Securities market grew by 26% to RM2.16 billion (US$ 0.66bn), while the average daily contracts in the Derivatives market grew by 11% to 50,046 contracts.

Bursa Malaysia launches ‘Marketplace’ in a bid to encourage local retail participation

Bursa Malaysia has launched an interactive stock investment platform “Marketplace” aimed at encouraging young investors aged between 25-35 years to start participating in the local capital market while also improving on their understanding and knowledge of the markets.

“For the first time, an Exchange is bringing together in one place all market participants, brokers, analysts, opinion leaders, in a collaborative partnership to share research, market insights and trading ideas to empower Malaysia to invest and trade confidently. For the first time in the world, Bursa Marketplace will make available to retail investors the S&P Capital IQ’s Alpha Factor quantitative analysis tools which will help in easily understanding the ranking system of all the stocks on Bursa Malaysia.” Bursa Malaysia Bhd CEO Tajuddin Atan said.

Bursa Malaysia ties up with Saudi Arabia to boost Islamic Finance markets

Bursa Malaysia and Saudi Arabia’s Tadawul have entered into a mutual agreement to jointly develop the two largest Islamic Finance Services markets by sharing expertise and developing human resources covering equities, mutual funds and sukuk (Islamic bonds).

Sources:http://www.freemalaysiatoday.com

http://www.nst.com.my

http://www.arabianbusiness.com

Source: Dealogic




Mar

ket

Cap

(U

S$

tri

llio

n)

IPO

Vo

lum

e (U

S$

m)

1.64

1.66

1.68

1.70

1.72

1.74

1.76

1.78

0

50

100

150

200

250


Fig 1. Malaysia’s market share rose to 21% within ASEAN this year with a recent surge in trading volumes.

Source: Dealogic



0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Industrial



EQUITY FUTURES ETFS

Eq

uit

ies

& F

utu

res

(US

$ B

illio

ns)

ETFs

(U

S$ M

illio

ns)

0

0.1

0.2

0.3

0.4

0.5

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0


Contact


Malaysia

34

Global Market Structure Indonesia


Global Market Structure Newsletter Issue 33, 2014

Chart DefinitionsVolatility: Standard deviation of index price returns over last 30 day period

Market Share: Percentage distribution of total value traded (USD) on the exchange/venue year to data

Estimated Cost of Trading: Expected arrival price impact calculated using Deutsche Bank’s internal market impact model for all index constituents, weighted average

Turnover Velocity: Ratio of USD volume traded on the exchange versus exchange market cap for the given month, annualized

ETF Volume: Total traded value (USD) of listed equity ETFs for the given month, average

Futures Volume: Total traded value (USD) of equity index futures for the given month, average

Equities Volume: Total traded value (USD) of listed stocks on equity exchanges in respective country for the given month, average

Primary Index* Spread: Primary index bid/ask spread, averaged over the trading day

Average Trade Size: Bid/Ask size of primary index constituent averaged over the day, across constituents

Index Price Change: Monthly percent change in country’s primary index level benchmarked to beginning of the year level

Market Movers: Stock constituents of the primary index with biggest change in price levels in the given month

Total IPO Volume: Aggregated US$ size of all new equity listings in the given month

Exchange Market Cap: Aggregated US$ market capitalization value of all individual equity instruments listed on the exchange

IPO Performance: Percentage change in price level from day of listing of the equity instrument, until the close of next following day (1day), month (1month) and last trading day of previous month (current)

*List of primary indices by country:

Australia S&P/ASX 200 IndexChina Shanghai Shenzhen CSI 300 IndexSingapore FTSE Straits Times IndexHong Kong Hang Seng IndexIndonesia Jakarta SE Composite IndexMalaysia FTSE Bursa Malaysia KLCI IndexKorea Korea SE Kospi 200 IndexIndia CNX Nifty IndexPhilippines Philippine SE Composite IndexThailand SET 50 IndexJapan TOPIX Stock Price IndexTaiwan Taiwan SE Weighted IndexUnited States S&P 500 IndexEurope Europe 600 EUR Price Index

35

Disclaimer

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In US: In accordance e with US regulation, please contact your local DB US registered broker dealer, Deutsche Bank Securities Inc., for any questions or discussion of potential transactions.

In JAPAN: This document is prepared by Deutsche Bank A. G. Hong Kong Branch and is distributed in Japan by Deutsche Securities Inc. (“DSI”). Please contact the responsible employee of DSI in case you have any question on this document. DSI serves as contact for the product or service described in this document.

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