After locking horns with the MCX Stock Exchange over violation of regulations regarding the shareholding pattern, the market regulator has now turned focus on the United Stock Exchange (USE), the newest one.

The Securities and Exchange Board of India (Sebi) has asked USE to bring down the representation of trading members on its board, issuing a showcause notice. USE will eventually also have to ask some shareholders to give up trading membership of the bourse, Sebi officials said.

While USE declined to comment on the notice or any other query on the subject, the Sebi move brings the issue of dominance of trading members back on the agenda, four years after stock exchanges in the country were de-mutualised.

The Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges (MIMPS) Regulations require trading members, including their associates, to cumulatively hold less than or equal to 49 per cent stake in a stock exchange. Also, the governing boards of these exchanges should not have more than 25 per cent representation of trading members. Both are principals of the MIMPS regulations, which if not adhered to all the time may defeat the purpose of de-mutualisation, experts said.

By Section 11 of MIMPS, at least 51 per cent of the equity share capital of an exchange should be continuously held by the public. The latter is defined as any member or section of the public other than shareholder of the recognised stock exchange having trading rights or any associates of such shareholders.

Present cases
Of the seven sub-sections defining associates in the MIMPS regulations, two key points apply in the USE case, since the shareholding is dominated by banks. They include all those entities which are either a holding company or subsidiary company of such shareholder (in the stock exchange) or a company under the same management. Or all those entities, over which such shareholder (of the stock exchange) directly or indirectly, by itself or in combination with other persons, exercises control.

The USE shareholders include 21 state-owned banks, six private banks and one foreign bank. Either the associates of these banks or they themselves are trading members of the exchange. Add another trading member-shareholder, Jaypee Capital. Thus, the stake of trading members in the USE is more than 49 per cent. The two trading members on the USE board are representatives from Jaypee Capital and Federal Bank.

A stock exchange official said USE had already started the process of reducing trading member representation on its board and the issue of higher trading member stake was being addressed.

While the representation of trading members on the National Stock Exchange (NSE), MCX-SX and the Bombay Stock Exchange (BSE) does not exceed the prescribed limit, shareholding patterns show the trading members collectively have more than 49 per cent stake in MCX-SX. Of the 23 shareholders of MCX-SX, 17, either themselves or their associates, are trading members of the currency segment and collectively hold 83.92 per cent stake. This is because most MCX-SX stake is divided only between banks and financial institutions.

Allahabad Bank, Andhra Bank, Bank of Baroda, Bank of India, Corporation Bank, Indian Bank, Indian Overseas Bank and Oriental Bank of Commerce each holds 4.6 per cent. Other shareholders are Axis Bank (1.84 per cent), HDFC (2.21 per cent), IFCI (13.23 per cent), IL&FS (5 per cent), State Bank of Indore (1.84 per per cent), Syndicate Bank (2.3 per cent), UCO Bank (0.46 per cent), Union Bank of India (11.5 per cent), United Bank of India and Vijaya Bank holding 1.84 per cent each.

MCX-SX has challenged the Sebi order in the high court here, for not allowing it to operate as a full scale stock exchange due to alleged violations of MIMPS regulations. The court has reserved its order after hearing arguments and the verdict is expected soon.

In the NSE, the stake of such trading members is around 46 per cent. Among the major shareholders whose associates are also trading members are State Bank of India (10.44 per cent), IDFC (7.88 per cent), IFCI (5.55), SBI Capital Markets (4.33 per cent), Goldman Sachs Strategic Investments Mauritius (five per cent). Citi Group (two per cent) and Morgan Stanley Mauritius (three per cent), among others. In the BSE, too, trading members and their associates are holding around 43 per cent stake.

Source: Business Standard

Guo Shuqing, head of China’s top securities regulator, reiterated on Thursday his goal of opening stock investment to the country’s pension funds, which have largely been unmanaged with returns that hardly beat inflation.

There would be an “active push for pension and housing provident funds to be invested in the securities market”, said the chairman of the China Securities Regulatory Commission (CSRC) in an article in the China Securities Journal.

Guo, who assumed his position in October, first expressed the intention in a public speech in December, when he said that allowing the funds to invest in the equity market would be “beneficial to the country, the capital markets and every citizen”.

But Guo’s proposal got a cool response from the Ministry of Human Resources and Social Security, which is in charge of the funds.

A spokesman with the ministry, Yin Chengji, told the Xinhua News Agency during a news conference on Jan 20 that pension funds required the ministry’s approval to invest in stocks and the ministry “temporarily had no plan” to approve such a move.

“There are strict rules for the management of different social securities funds in China. According to existing rules, pension funds can only be invested in national bonds or put into bank accounts,” said Yin.

Analysts said that Guo’s comments on Thursday showed the new chairman’s determination to push on with his plan.

“I think Guo sees bringing pension funds into the securities market as one of the most important changes he wants to make as the new chairman,” said Liu Guanwu, an analyst with Beijing-based consultancy Analysys International.

But he said that further inter-departmental communications were needed to make the plan a reality.

In China, pension fund contributions by employees are largely unmanaged. Once the capital is out of the employee’s hands, little is done to ensure that it grows in line with inflation. No central government agency is responsible for investing the money, and few local governments take that step.

As of the end of 2010, only 31.8 billion yuan ($5 billion) of the country’s 1.6 trillion yuan in pension fund assets had been invested in securities, according to the Ministry of Human Resources and Social Security.

A report by the Chinese Academy of Social Sciences said that the nation’s pension funds yield less than 2 percent a year, while the consumer price index increased 5.4 percent in 2011, meaning its value shrank in real terms.

Feng Jin, a professor of labor economics at Fudan University in Shanghai, agreed that the pension funds should be more actively managed, but she added that stock markets abroad would be more suitable than domestic ones.

The investment of pension funds is just one of several reforms that the new chairman has initiated since October.

After vowing to crack down on insider trading and pushing listed companies to increase their dividend payouts, the CSRC took steps on Wednesday to boost its transparency by publishing a full list of Chinese companies that have applied for a domestic IPO.

The list, which will be updated weekly, included more than 500 companies, including China Postal Express & Logistics Corp and Guosen Securities Co.

Companies typically wait for about six months before obtaining regulatory approval for a listing after submitting an IPO application. Under the current system, the CSRC only posts a copy of the draft prospectus on its website, along with a date for the review of the IPO plan.

Source: China Daily

The Stock Exchange of Hong Kong Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), announces that with effect from 10 February 2012 (Friday), 12 additional securities will be eligible for short selling and 39 existing designated securities will be removed from the list. The total number of designated securities for short selling will be 636 after the revision.

The securities to be added to the list of designated securities and the securities to be removed from such list are shown in the attachment. The revised list of all designated securities is also available on the HKEx website.

Newly Added (12)

C FIBER OPTIC
CREDIT CHINA
ESUN HOLDINGS
GLOBAL SWEET
HSIN CHONG CONS
MADEX INTL HOLD
SINOCOP RES
TENFU
TOWN HEALTH
TSE SUI LUEN
VARITRONIX INTL
YUZHOU PPT

Deletion of 39 Existing Designated Securities

APAC RESOURCES
ASIA STANDARD
BESUNYEN
CH GRAND FOREST
CHINA AOYUAN
CHINA MERCHANTS
CHINA MINING
CHU KONG SHIP
COFCO PACKAGING
DICKSON CONCEPT
EMBRY HOLDINGS
EXTRAWELL PHAR
FAIRWOOD HOLD
GOOD FRIEND
HENDERSON INV
HERITAGE INT’L
INNOVATIONPAY
JU TENG INTL
KOSMO HOTELS
LK TECH
MY MEDICARE
NEWTON RES
PAX GLOBAL
PNG RESOURCES
PYI CORP
RICHLY FIELD
RMIH
SAMSON HOLDING
SRE GROUP
SUNEVISION
SUNNY OPTICAL
SUNSHINE PAPER
SUSTAIN FOREST
TRAUSON HLDGS
UNITED GENE GP
UNIVERSAL TECH
WELLING HOLDING
YOUYUAN HLDGS
ZHUGUANG HOLD

Singapore Exchange (SGX) saw year-on-year growth in its commodities, clearing and fixed income activities in January 2012.

Securities
* Securities daily average value was notably 47% higher at $1.3 billion in January compared to a seasonally quiet December 2011, but down 27% year-on-year.
* Exchange traded fund turnover declined 36% to $509 million.
* Structured warrants volume increased 67% year-on-year to 3.5 billion units.

Derivatives
* Derivatives daily average volume was up 10% at 265,590 contracts compared to December 2011, and up 2% year-on-year.
* On a month-on-month basis, China A50 futures trading increased 18% to 403,621 contracts; Nikkei 225 futures trading decreased 12% to 1.7 million contracts; Nifty futures activity was up 0.6% to 1.1 million contracts and MSCI Taiwan futures volume was down 18% to 1 million contracts. The trading of MSCI Singapore Index Futures was up 3% to 302,672 contracts.

Commodities and clearing
* Trading of agricultural commodity futures rose 52% to 19,357 contracts as participation in SICOM
rubber futures continued to grow.
* Volume of OTC commodity contracts cleared was 45% up at 24,512 contracts; clearing of iron ore swaps doubled to 8,929 contracts.
* OTC interest rate swaps cleared totaled a notional $200 billion since the November 2010 launch of the service; volume cleared in January was $13 billion, down 2%.

Fixed Income
* Bond listings totaled $13.5 billion, up 12% year-on-year and up 63% compared to last month.

The biggest listings were the Export-Import Bank of Korea’s US$1.25 billion 4% Notes due 2017 and US$1 billion 5% Notes due 2022 and a US$1.75 billion 5.25% Notes due 2042 sovereign bond by the Republic of Indonesia.

We sincerely appreciate your support.

We deeply apologize to our market users, particularly investors for any inconvenience which may have been caused due to the failure of our information distribution system on February 2nd, 2012.

This failure was caused by a hardware failure. By replacing the failed hardware, we have already secured a situation where no further problems in stock trading will occur. From tomorrow stock trading will be conducted as usual.

We will identify the cause as soon as possible and prepare the necessary preventive measures. We will also make utmost efforts to not cause inconvenience to market users in the future. Therefore, we sincerely look forward to your continued support of our market operations.

1) Possible Changes to the Requirements for Overseas Companies Seeking Listings in Hong Kong, including those seeking secondary listings

HKEx is working closely with the Securities and Futures Commission (SFC) with a view to releasing a consultation paper within a few months. The objectives are to clarify and streamline the requirements for listing overseas companies and to provide a disclosure-based approach to secondary listings of seasoned issuers from reputable overseas exchanges.

2) Consultation Paper on Review of the Code on Corporate Governance Practices and Associated Listing Rules

The consultation conclusions were published on 28 October 2011. Most Rule amendments took effect on 1 January 2012; Corporate Governance Code and certain Rules will become effective on 1 April 2012.

HKEx organised a series of 10 free seminars in November and December 2011 to provide training and practical guidance on Listing Rule amendments on corporate governance and practical issues relating to Rule compliance. One of the seminars has been recorded and posted on HKEx website as a webcast.

In January 2012, HKEx presented the same seminar in Putonghua in Hong Kong, Shanghai and Beijing. One of the Putonghua seminars has also been posted on the HKEx website as a webcast.

3) Consultation on the Placing of Shares at Initial Public Offering (IPO) and Pre-IPO Investments

At the moment, the interim guidance issued by the Listing Committee appears to be well understood and accepted by market participants. HKEx will monitor developments carefully to see if further guidance is needed.

4) Reporting on Environmental and Sustainability Issues

A consultation paper on the draft ESG Reporting Guide was published on 9 December 2011 and the deadline for replies is 9 April 2012.

5) Simplification of Prospectuses and Related Documents

HKEx published a guidance letter, GL 27-12, on the HKEx website on 12 January 2012 to give guidance on how to draft the “Summary and Highlights” section of prospectus in a way that is concise, easy to read and in plain language.

6) Study on After-hours Derivatives Trading

On 15 December 2011, HKEx published the consultation conclusions and announced its plan to introduce after-hours derivatives trading. The target for implementation is the second half of 2012.

7) Exploration of New Financial Products/Services and Review of Existing Products/Services

VHSI futures will commence trading on 20 February 2012. HKEx is rolling out educational and marketing activities for VHSI futures.

The RMB readiness test for Exchange Participants and Clearing Participants was held on 14 January 2012.

8 ) Consultation on a Scripless Securities Market

The Scripless Securities Market Working Group has completed its study of the operational details of the proposed model which will form the basis for the SFC’s consultation on the new subsidiary legislation under the SFO in 2012.

9) Derivatives Market System Capacity and Technology Upgrade

The upgrade was implemented on 12 December 2011.

10) Securities Market System Capacity and Technology Upgrades (also known as AMS/3.8 and MDS/3.8)

The upgrades were implemented on 5 December 2011.

11) Hosting Services

HKEx has been developing the operational model and service offerings of Hosting Services to prepare for service launch in 2012. Total capacity of the hosting floors inside the new HKEx Data Centre can support up to 1,200 equipment cabinets; Phase 1 of around 320 cabinets will be made available to Exchange Participants, information vendors, technology and communications providers, which will be able to interact within the ecosystem, in the fourth quarter of 2012.

12) Establishment of Clearing House for Over-the-counter (OTC) Derivatives Traded in Hong Kong

HKEx responded to the consultation on legislative amendments. System implementation has started and the risk management and operations models are being finalised. HKEx is also engaging potential Participants.

13) Next Generation Market Data System (NGMDS)

HKEx has begun developing a new market data system to consolidate the market data distribution for all HKEx’s asset classes through a single platform. The NGMDS is targeted to be rolled out in HKEx’s securities market in around mid-2013.

Equity Market
-TOPIX rose 3.7% following receding concerns over Europe, strong overseas stock prices, and lively conditions for stocks appearing in the news.

Average daily trading value rose 15% on the previous month as a global risk-taking trend emerged, reaching JPY 1 trillion for the first time in a month.

[ETF/ETN] -ETFs linked to TOPIX and Nikkei 225 rose along with the market.

[REIT] -The REIT Index saw some recovery due to the risk-taking trend accompanying receding European instability, leading to the first monthly gain in 9 months.

Derivatives Market
[JGB Futures]
-End-of-month open interest for JGB futures was 83,554 contracts, surpassing 80,000 contracts for the first time in 5 months.

[Index Futures]
-Monthly trading volume for mini-TOPIX futures reached 165,611 contracts (daily average: 8,716 contracts), the 3rd highest figure since listing.
-End-of-month open interest for mini-TOPIX futures was 12,228 contracts, surpassing 12,000 contracts for the first time in 21 months.

Period :From 9:00 A.M. on February 2, 2012
Reason :Troubles on the market data/market information distribution.

Note 1: ToSTNeT transactions for the subjected securities are halted during the period above as well.
Note 2: Resumption time of trading for the subjected securities will be determined later.

Trading to commence at 12:30pm local time.
241 securities affected

ASIC has finalised its investigation into Saxo Bank A/S, the former provider of the trading platform for collapsed broker, Sonray Capital Markets Pty Ltd (in liquidation) (Sonray).

Following the conclusion of that investigation, which focused on the risk management practices of Saxo Bank, ASIC has agreed with Saxo Bank that additional licence conditions will be included on the Australian financial services (AFS) licence under which it will continue to conduct its business in Australia.

The additional licence conditions agreed with Saxo Bank, which apply to Saxo Capital Markets (Australia) Pty Ltd (SCMA) require SCMA to:

engage an expert to review and report on the adequacy of SCMA’s risk management systems to properly address credit risk, client risk and compliance risk
implement any recommendations made by the expert over a six month period
engage the expert for further reviews and reporting over an 18 month period following the initial expert report, and
provide ASIC, on a bi-annual basis, independent verification of client monies being held by SCMA.

Since September 2004, Saxo Bank has held an AFSL authorising it to provide financial services on a wholesale basis. Under that wholesale licence, Saxo Bank contracted with a number of retail licensees in Australia, including Sonray, to facilitate the trading of various financial products on a trading platform, Saxo Trader.

Saxo Bank will now provide financial services in Australia to retail clients directly through the entity SCMA. This follows Saxo Bank, in late December 2011, acquiring control of Commodity Broking Services Pty Ltd by purchasing the shares of Logos Commodities Pty Ltd, the holding company of CBS. At the same time, CBS changed its name to Saxo Capital Markets (Australia) Pty Ltd.

ASIC Chairman, Greg Medcraft, said the additional licence conditions on Saxo Bank’s AFSL reflected ASIC’s priority to improve industry standards amongst financial services licensees. He added that the new licence conditions were an important part of restoring investor confidence in the broader broking area and providing reassurance that compliance procedures are in place to ensure risk management practices are of the standard required under the law.

Background

The additional licence conditions agreed with Saxo Bank are the result of an ASIC investigation into Saxo Bank following the collapse of Sonray in June 2010. ASIC’s investigation focused upon the risk management practices of Saxo Bank arising out of its relationship with Sonray, one of its white label clients operating in Australia.

On 22 June 2010, John Lindholm and George Georges of Ferrier Hodgson were appointed voluntary administrators of Sonray and on 27 October 2010, Sonray was placed into liquidation.

On 14 October 2011, the former chief executive officer of Sonray Scott Murray was sentenced to five years imprisonment, to serve a minimum of two years and six months before he is eligible for parole (refer ASIC Advisory 11-222 Former Sonray CEO jailed).

On 27 September 2011, the sole director of Sonray, Mr Russell Johnson, was arrested and charged with 24 offences (refer ASIC Advisory 11-212 Sonray director arrested and charged).

The trading volume of Three-month Euroyen futures was 245,444 decreasing 65.5% in comparison to that of the prior year comparable month, and decreasing 23.4% in comparison to that of the prior month, and the average daily volume was 12,918.

The total trading volume of Exchange Forex Margin contracts (Click 365) was 6,409,315 decreasing 36.3% in comparison to that of the prior year comparable month, and decreasing 11.4% in comparison to that of the prior month, and the average daily trading volume was 305,309 .

The total trading volume of Exchange Equity Index Margin contracts (Kabu 365) was 55,794 decreasing 33.4% in comparison to that of the prior year comparable month, and decreasing 4.9% in comparison to that of the prior month, and the average daily trading volume was 2,642 .

The total trading volume was 6,711,308 , decreasing 38.2% in comparison to that of the prior year comparable month, and decreasing 11.8% in comparison to that of the prior month, and the average daily trading volume was 321,247 .