New era of cooperation among Asian stock exchanges

Updated: Monday December 9, 2013 MYT 6:44:53 AM

New era of cooperation among Asian stock exchanges

THE landmark collaboration between two rivals – the Singapore Exchange (SGX) andHong Kong Exchanges & Clearing (HKEx) – marks the beginning of a new era of strengthening of ties among Asian exchanges. Coming together in the face of competition, the partnership will enhance the strength of Hong Kong as a yuan hub, and Singapore as a foreign exchange hub as well as a gateway for the futures market in Asia, said the Singapore Business Times (BT).The two exchanges have agreed to cooperate in various areas, including developing yuan-denominated products jointly and working on technology development and regulatory issues, said the BT.

Earlier, China had allowed Singapore to become one of the two yuan deposit investment hubs besides London.

That was the first time China had opened its yuan deposit investment business ouside of Hong Kong.

This collaboration between SGX and HKEx would pave the way for the deepening of the yuan business which Hong Kong is already famous for.

In another landmark action, a group of European institutional investors have suedRoyal Bank of Scotland (RBS) and Standard & Poor’s (S&P) for damages of up to US$250mil related to complex financial products purchased prior to the 2008 financial crisis.

The claim, filed in Amsterdam, is the first group action of its kind to be launched in Europe against an investment bank and rating agency for their conduct prior to the crisis, said Reuters, quoting a statement by litigation finance company Bentham IMF Ltd to the Australian stock exchange.

S&P was vigorously defending its position while RBS was not available for comment, said Reuters.

The case follows the landmark judgment issued by Australia’s Federal Court in November 2012, which found S&P had deceived 12 local government councils that bought the constant proportion debt obligations, said Reuters.

S&P said it was appealing the Australian ruling and, meanwhile, it had filed an action in London in May, challenging the jurisdiction of the Netherlands.

Rating agencies are not spared the rod when it comes to marketing of complex financial products that went down in the 2008 financial crisis.

They had rolled out glowing reports of these products which backfired when the huge credit bubble burst.

In the wake of the financial crisis, rating agencies had taken many steps to restore their credibility.

With the current investor actions, it appears that they may have to crank up the public relations machine again.

Fresh from the record US$13bil settlement in fines paid by JP Morgan, the action swings to six European banks which were fined a record 1.71 billion euros (US$2.3bil) for rigging of financial benchmarks.

The benchmarks involved are the London interbank offered rate, or Libor, the Tokyo interbank offered rate and the euro area equivalents, said Reuters.

They are used to price hundreds of trillions of dollars in assets ranging from mortgages to derivatives.

Authorities around the world have so far handed down a total of US$3.7bil in fines toUBS, RBS, Barclays, Rabobank and ICAP for manipulating rates, while seven individuals face criminal charges, said Reuters.

While the fines are falling unabated, many banks have prohibited their foreign exchange and fixed income staff from using online chat rooms.

Chat rooms have been a focus for regulators investigating the manipulation of benchmark interest rates and possible rigging in the US$5.3 trillion-a-day foreign exchange market, said Reuters.

Aside from chatrooms, it may be sometime later when traders will find another avenue to gather and exchange information.

But only time will tell if the punitive actions will deter them from another attempt to rig or manipulate rates.

Columnist YAP LENG KUEN feels it is unfair that innocent parties are deprived of their online chat.