The BRICS Securities and Derivatives Markets - Hong Kong ...

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SENSEX Index daily closing (points)Future trading volume (million contracts)The BRICS Securities and Derivatives MarketsFigure 4-4.Daily closing of SENSEX Index and monthly trading volume ofSENSEX Index futures on the BSE (2002 – 2012H1)SENSEX daily closing and monthly volume of SENSEX Index futures (2002 - 2012H1)25,0004SENSEX Index futures monthly volumeSENSEX Index daily closing21005 (2010/11/05)17430 (2012/06/29)20,000315,000210,0005,0003264 (2002/01/01)12834 (2002/10/28)02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120Note: Volume figures of SENSEX Index Futures are available since January 2011 and those before late 2011are too small to be identifiable in the chart.Sources: Reuters and FIA4.4 Other international cooperation initiativesAlliances that the Indian exchanges have reached with their overseas counterparts are mainlyin the area of derivatives product development.The NSE has established a cross-listing relationship with CME Group for the listing of futurescontracts on the NSE’s S&P CNX Nifty Index in the US and futures and options contracts onthe two US indices S&P 500 Index (S&P 500) and Dow Jones Industrial Average (DJIA) inIndia. The NSE has also partnered with Singapore Exchange (SGX) in the listing of futuresand options contracts on S&P CNX Nifty Index in Singapore. Launched in 2000, SGX’sS&P CNX Nifty Index futures achieved a significant trading volume — 14.7 million contractsin 2011, representing 20% of SGX’s total derivatives volume. On the other hand, themini-futures contracts on the index launched by CME Group in 2010 had only about 46,000contracts traded in 2011.Reciprocally, the NSE launched S&P 500 futures and options and DJIA futures in August2011, which achieved average daily volumes of 1,846 contracts, 99 contracts and 2,464contracts respectively in the first half of 2012. The next attempt of the NSE to offer tradingof futures and options on foreign indices in India was made in May 2012 when it partneredwith FTSE Group (part of LSE Group) to launch FTSE 100 Index futures and optionscontracts. These products achieved average daily volumes of 5,064 contracts and 830contracts respectively up to June 2012. The NSE, which has signed a “letter of support” onthe BRICS Exchange Alliance, has not joined the other alliance members in the cross-listingof benchmark equity index products.- 18 - Research & Corporate Development, HKEx31 December 2012
The BRICS Securities and Derivatives MarketsThe BSE, whose shareholders include DB and SGX (5% each), partnered with Eurex of theDB Group to launch SENSEX Index futures and options in Germany in October 2010.However, little or no trading has been recorded since then. In addition, the BSE agreed withthe US International Securities Exchange (ISE) of the DB Group for the introduction ofderivatives based on ISE’s indices in India. However, such products are not yet launched.Separately, the BSE signed a MOU with the Osaka Securities Exchange (OSE) in April 2011for the development of financial markets in India and Japan.To promote sustainable investment practices in its market, the BSE joined in October 2012 theSustainable Stock Exchange Initiative which is promoted by five global exchanges —NASDAQ OMX, BM&FBOVESPA, the JSE, Egyptian Exchange and the Istanbul StockExchange.5. CHINA/HONG KONGMainland China and Hong Kong operate independent securities and derivatives markets,under different rules and regulations and with different market infrastructure. In MainlandChina, there are two stock exchanges ― the Shanghai Stock Exchange (SHSE) and theShenzhen Stock Exchange (SZSE); one financial derivatives exchange ― China FinancialFutures Exchange (CFFEX); and three commodities exchanges ― Shanghai FuturesExchange (SHFE), Dalian Commodity Exchange (DCE) and Zhengzhou CommodityExchange (ZCE) which offer futures trading on commodities. Apart from that, there is anational off-exchange (over-the-counter) trading system ― the Agency Share Transfer System― for the trading of delisted stocks and for technology growth companies. 9 In Hong Kong,HKEx is the dominant exchange operating both the securities and the derivatives market.This section focuses on the stock exchanges and the financial derivatives exchanges in theChina/Hong Kong markets, although the Mainland exchanges are not yet members of theBRICS Exchange Alliance.The China Securities Regulatory Commission (CSRC) is the securities and futures marketregulator in Mainland China. It regulates the exchanges and clearing houses, marketintermediaries, investment fund companies and other service providers in the market. ThePeople’s Bank of China (PBOC, the Central Bank) and the China Banking RegulatoryCommission (CBRC) are responsible for the regulation of the banks which provide servicesfor the securities and futures market. The China Insurance Regulatory Commission (CIRC)is responsible for regulating the insurance companies, including their scope and degree ofparticipation in the securities and futures markets. In the process of gradual market opening,the CSRC works with the other two regulators and other government authorities, including theState Administration of Foreign Exchange, in formulating related policies and regulations.9There are also numerous local equity or property rights exchanges in the Mainland, which provide tradingvenues for the shares and assets of non-listed companies. These are outside the scope of the current article.- 19 - Research & Corporate Development, HKEx31 December 2012
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