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Enoch Yiu

The stock exchange yesterday stepped up its action against Singapore's planned launch of a Hong Kong futures contract by banning all 30 information service providers in the SAR from supplying real-time stocks data to Morgan Stanley Capital International (MSCI).

 The move came after exchange officials yesterday met Reuters for the second time this week to remind it not to violate its contract with the exchange by providing real-time price information for MSCI to calculate the MSCI Hong Kong index (HiMSCI).

 The Singapore International Monetary Exchange (Simex) will introduce a Hong Kong index futures product based on the HiMSCI on November 23.

 Chief executive Alec Tsui Yiu-wa said the exchange would write letters to all 30 information service providers, and would post advertisements to remind them of their contractual obligations.

 'Under the contract, no service provider should give exchange data to a client who uses the information to help an overseas exchange launch a derivative product,' he said.

 'Reuters and other information providers should get approval from the exchange before they allow their clients to use exchange data in such a way.

 'We are happy that Reuters has reacted positively to the exchange's concerns over the past two meetings.'  The exchange move would effectively ban MSCI from finding any other service provider to obtain exchange data.

 Mr Tsui said the exchange had to take strong action to defend its position.

 'It is possible that the stock exchange may launch local stock index derivatives. The Simex HiMSCI futures will be a direct competitor to Hong Kong,' he said.

 'The different regulation system in Singapore also creates a regulatory loophole.'  He said the stock exchange was the 'victim' in the case as the Simex HiMSCI futures might have a negative impact on the local stock market.

 Neither Simex nor MSCI had contacted the exchange over the launch of HiMSCI futures, he said.

 Chinese University of Hong Kong professor Raymond Chiang Chiu-ping said if HiMSCI could not be calculated on real-time data, it would find it hard to attract investors.

 'It would make a lot of difference to the index futures even if there is only a 15-second delay in the price data it gets,' he said.

 City University of Hong Kong professor of finance Stephen Cheung Yan-leung supported the exchange's action.

 He said the different regulatory standards in Singapore and Hong Kong might attract some traders to switch to Singapore to escape Hong Kong's tougher margin and disclosure requirements in the futures market.

 'Speculators may manipulate HiMSCI futures in a bid to affect the price of Hong Kong stocks,' he said.

 He urged the futures exchange to relax the margins on Hang Seng Index futures, and to extend trading hours to compete with Simex.

 The margin on HSI futures was 15 per cent of the contract value, compared with 6 to 8 per cent overseas, he said.



HK exchange mounts fresh futures offensive