The Singapore International Monetary Exchange (Simex) yesterday criticised the stock exchange for seeking to undermine its planned Hong Kong futures product. Simex said it opposed the exchange's move to prevent Reuters passing real-time information to Morgan Stanley Capital International to calculate its MSCI Hong Kong stock index (HiMSCI). 'We would be surprised if [the Stock Exchange of Hong Kong], a major regional exchange, is indeed considering such a step,' a Simex spokesman said. 'It goes against Securities and Futures Commission statements that anyone is free to introduce a derivative based on the Hong Kong stock market.' Last week, Simex announced it would launch its HiMSCI futures contract based on the MSCI Hong Kong index on November 23. Legislators and the stock exchange have raised fears that speculators might use the Simex HiMSCI futures contract to manipulate the market. Since Simex is not regulated by Hong Kong law, it will not need to follow the margin levels and disclosure requirements implemented in the futures market by the Government during its recent drive to curb speculators. Simex yesterday rejected the concerns, saying: 'Simex's regulatory controls are in line with international standards of best practice.' The spokesman said: 'The contract will be subject to the same prudential regulation and financial safeguards that apply to all Simex contracts, to preserve the market's integrity and protect customers' interests at all times.' A stock exchange source said it maintained its stance following the Simex complaints, adding Reuters and other information providers in Hong Kong could not use stock exchange price information to help overseas markets launch derivative products. He said the contract between the exchange and information providers indicated 'no subscriber shall use the information or any part thereof to establish, maintain or provide or to assist in establishing, maintaining or providing an Off Market'. The exchange move will effectively ban Morgan Stanley Capital International from getting real-time stock information to calculate the HiMSCI, and will reduce the competitiveness of the Simex product in comparison with Hang Seng Index futures. Reuters country manager for Hong Kong and Macau Dennis Lim yesterday said the stock exchange had expressed concerns in a recent meeting about the use of exchange data by a Reuters customer. 'Reuters is working with the exchange to resolve the matter and is awaiting further clarification from the exchange on the concerns raised,' he said. 'The provision of price data from the [Stock Exchange of Hong Kong] by Reuters to its clients is regulated by a contract with the exchange.' A Morgan Stanley spokesman refused to comment. Hong Kong Futures Exchange board members this week will meet to finalise its competitiveness strategy in relation to the Simex launch, exchange chief executive Randy Gilmore said in a circular to members last Friday. He asked the members to give their views on 'what measures the exchange should consider to ensure our Hong Kong derivatives markets can meet this new competitive challenge'. Futures traders comments include urging it to reduce margin levels and extend trading hours in a bid to compete with the Simex product. The Simex HiMSCI futures contract has a smaller value than Hang Seng Index futures, and will have a trading period 30 minutes longer than the Hong Kong market.
