Regulatory changes
  • Searching for Growth in the New China Economy

    Source: Craig Lazzara, Simon Lee
    Date Submitted: 02 Mar 2018
    Views: 13
    Downloads: 0
    What’s driving the growth of China’s equity market? Simon Lee of CSOP Asset Management joins S&P DJI’s Craig Lazzara to discuss the forces driving economic growth in China and how they are influencing equity sectors in China’s “new economy”.
  • Demystifying commodity futures in China

    Source: John Hua Fan, Tingxi Zhang
    Date Submitted: 22 Feb 2018
    Views: 55
    Downloads: 7
    This paper presents the most comprehensive study to date on commodity futures in China. We find that passive long-only investments deliver poor economic returns. Among 12 long-short strategies examined, momentum and term structure strategies generate statistically significant economic profits in nearby and distant contracts, illiquid markets and randomly selected commodity sectors. Our results cannot be attributed to aggregate market risks, none-tradable macroeconomic risks, commodity specific risks, market sentiment, transactions costs and data-snooping. We show that liquidity, anchoring bias and regulation induced limits-to-arbitrage provide at least a partial explanation. Furthermore, our findings suggest that long-short strategies that exploit past returns and hedging pressure make excellent candidates for hedging against movements in traditional assets in China. This paper also highlights the urgency to establish a CFTC-type repository for positions data that distinguish hedgers and speculators. Such data are essential to assess the effectiveness of risk transfers in these markets.
  • Impact of GICS Changes to Pan Asian Sectors: BAT Moving Away From Information Technology

    Source: Utkarsh Agrawal
    Date Submitted: 20 Feb 2018
    Views: 25
    Downloads: 0
    S&P Dow Jones Indices and MSCI have announced revisions to the GICS® structure, to be implemented in September 2018, that will affect the consumer discretionary, information technology, and telecommunication services sectors.
  • Green Bond: A Socially Responsible Investment (SRI) Instrument 

    Source: Pradiptarathi Panda
    Date Submitted: 17 Feb 2018
    Views: 25
    Downloads: 3
    Green Bond attracts a specific group of investors and helps issuers as well as to the economy at large. This innovative financial instrument was issued in the year 2008 by World Bank with the request of investors. Now this instrument is gaining popularity world-wide. So far World Bank has made 130 issues in 18 currencies in totaling of US$5.7 billion.  Followed by World Bank, there are several institutions, which are issuing this instrument. The present study aims to state the genesis of Green Bond, its inception and the road ahead so far with current statistics
  • Impact of Market-Wide Circuit-Breaker on Trading Activity and Volatility: Empirical Evidence from Indian Markets

    Source: Latha S Chari , Pradiptarathi Panda, Sunder Ram Korivi
    Date Submitted: 17 Feb 2018
    Views: 1159
    Downloads: 9
    To protect market integrity, regulators across the globe have applied trading constraining mechanisms like market-wide circuit-breakers, price limits, stock-based trading halts and the like. In June 2001, Securities Exchange Board of India (SEBI) introduced the market-wide circuit-breaker mechanism for Indian markets in a similar manner to other markets. Till date the Indian market has applied these marketwide circuit-breakers six times. This study attempts to examine the impact of market-wide circuit-breakers on trading activity and volatility. We consider data of Nifty closing price, turnover and number of shares traded for six different windows with event day, event plus 1-3 days, and 10 days average. The study estimates intraday return, overnight return high low volatility and day time volatility followed by T-test to measure the significance difference between average turnover, number of shares traded, high low and daily volatility with event day. The study finds that the effect of market-wide circuit-breaker continues up to three post-event days.
  • Dynamic regime switching behaviour  between cash and futures market:  A case of interest rates in India 

    Source: Pradiptarathi Panda, Prof. Malabika Deo, Jyothi Chitteni
    Date Submitted: 17 Feb 2018
    Views: 13
    Downloads: 2
    Abstract. This study examines the Markov dynamic regime switching behaviour between cash and futures market in respect to interest rate in India. The study uses daily data of volumes, weighted average price, weighted average yield for cash market and total values, open interest, settlement price from 21st January 2014 to 30th October 2014. We a contract i.e. 883GS2023 of NSE has been used for our analysis. All data are sourced from Clearing Corporation of India Ltd. (CCIL) and National Stock Exchange (NSE). We have run regime switching regression to capture the switching behaviour in bull as well as bear state of cash to future and future to cash in six different equations. This model also captures the estimated probability and estimated duration to continue in bull and bear state and does not require to test stationarity or conversion of data into any normalised form.  We find switching behaviour in both cash is regime switching the future as well as future is regime switching the cash market and the estimated probability differs from 70% to 97% in different cases. The estimated duration to continue in an existing state has also been captured in 6 different equations. 
  • Interest Rate: Futures and Cash Market Spill-over’s in India 

    Source: Hrudaranjan Sahoo, Pradiptarathi Panda
    Date Submitted: 17 Feb 2018
    Views: 16
    Downloads: 2
    The present study analyses the spill-over’s effect between the interest rate cash and futures market in India. We use daily data of volumes, weighted average price, weighted average yield to represent cash market and number of contracts traded, values, open interest, settlement price to represent futures market from 4th August 2014 to 31st December 2015 with 337 (trading days) number of observations. We consider a single instrument (i.e. 08.40 GS 2024) which is most liquid, active and have contracts for a longer time period. All data are sourced from Clearing Corporation of India Ltd. (CCIL) and National Stock Exchange (NSE). We first presents descriptive statistics followed by stationarity test, Correlation, Regression, Granger Causality test and ARMA (1, 1), GARCH (1, 1) spill-over’s model. The study finds cash market price is leading the futures market but the future settlement price has impact on the yield of the underlying security. 
  • Rise and Fall of Interest Rate Futures in Indian Derivative Market 

    Source: Pradiptarathi Panda, Dr. M Thiripalraju
    Date Submitted: 17 Feb 2018
    Views: 0
    Downloads: 0
    Interest rate derivatives are the most traded and widely accepted derivative instrument in the international derivative market. But this product is not popular in Indian derivative market. In 1999, the Over the Counter (OTC) interest rate derivative products were introduced and successful in terms of volumes. The Indian financial market introduced exchange traded interest rate derivatives in the year 2003, 2009 and 2014. While the product failed twice, in the third time (in 2014) the initial volumes are sharply declining in three exchanges viz. MCX-SX, NSE and BSE. In this backdrop, this study attempts to analyse the past, present and future of interest rate futures in Indian derivative market using the volumes, values and open interest of Interest rate derivatives for three exchanges. 
  • Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies?  

    Source: Sean Foley, Jonathan R. Karlsen, Talis J. Putnins
    Date Submitted: 02 Feb 2018
    Views: 82
    Downloads: 0
    Cryptocurrencies have grown rapidly in price, popularity, and mainstream adoption. The total market capitalization of bitcoin alone exceeds $250 billion as at January 2018, with a further $400 billion in over 1,000 other cryptocurrencies. Over 170 “cryptofunds” have emerged, attracting around $2.3 billion in assets under management. What was once a fringe asset is quickly maturing.
    The rapid growth in cryptocurrencies and the anonymity that they provide users has created considerable regulatory challenges, including the use of cryptocurrencies in illegal trade (drugs, hacks and thefts, illegal pornography, even murder-for-hire), potential to fund terrorism, launder money, and avoid capital controls. There is little doubt that by providing a digital and anonymous payment mechanism, cryptocurrencies have facilitated the growth of “darknet” marketplaces that trade illegal goods and services.
    In a recent research paper, we quantify the amount of illegal activity that involves the largest cryptocurrency, bitcoin. As a starting point, we exploit several recent seizures of bitcoin by law enforcement agencies to construct a sample of known illegal activity. We also identify the bitcoin addresses of major illegal darknet marketplaces. The public nature of the blockchain allows us to work backwards from the law enforcement agency bitcoin seizures and the darknet marketplaces through the network of transactions to identify those bitcoin users that were involved in buying and selling illegal goods and services online. We then apply two econometric methods to the sample of known illegal activity to estimate the full scale of illegal activity.
    We find that illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity. The estimated 24 million bitcoin market participants that use bitcoin primarily for illegal purposes (as at April 2017) annually conduct around 36 million transactions, with a value of around $72 billion, and collectively hold around $8 billion worth of bitcoin.
    To give these numbers some context, the total market for illegal drugs in the US and Europe is estimated to be around $100 billion and €24 billion annually. Such comparisons provide a sense that the scale of the illegal activity involving bitcoin is not only meaningful as a proportion of bitcoin activity, but also in absolute dollar terms. The scale of illegal activity suggests that cryptocurrencies are transforming the way black markets operate by enabling “black market e-commerce”. In effect, cryptocurrencies are transforming the black market much like PayPal and other online payment mechanisms revolutionized the retail industry through online shopping.
    In recent years (since 2015), the proportion of bitcoin activity associated with illegal trade has declined. There are two reasons for this trend. The first is an increase in mainstream and speculative interest in bitcoin (growth in the number of legal users), causing the proportion of illegal bitcoin activity to decline, despite the fact that the absolute amount of such activity has continued to increase. The second factor is the emergence of alternative cryptocurrencies that are better at concealing a user’s activity (e.g., Dash, Monero, and ZCash). Despite these factors and numerous darknet marketplace seizures by law enforcement agencies, the amount of illegal activity involving bitcoin remains close to its all-time high.
    In shedding light on the dark side of cryptocurrencies, we hope this research will reduce some of the regulatory uncertainty about the negative consequences of cryptocurrencies. Hopefully, more informed policy decisions that assess the costs and benefits will contribute to these technologies reaching their potential. Our paper also helps understand the intrinsic value of bitcoin, highlighting that a significant component of its value as a payment system comes from its use in illegal trade. This has ethical implications for bitcoin as an investment. Third, the techniques developed in this paper can be used in cryptocurrency surveillance in a number of ways, including monitoring trends in illegal activity, its response to regulatory interventions, how its characteristics change through time, and identifying key bitcoin users, such as “hubs” in the illegal trade network.
    For more information, download the paper at
  • SGX Consultation Paper on Quarterly Reporting Framework

    Date Submitted: 23 Jan 2018
    Views: 1725
    Downloads: 0
    The Singapore Exchange (SGX) is seeking feedback on whether to retain quarterly reporting (QR). Concern about compliance costs has been repeatedly raised among market professionals and listed companies while investors prefer adjustments to QR to be tempered.

    On behalf of the Advocacy Committee of CFA Society Singapore, we would like to seek your feedback through a short survey  (2 multiple choice questions & an optional written section), via the following hyperlink:

    Detailed information can be found on the below official hyperlinks:

    We would appreciate if interested members could leave your comments on ARX or email me by 06th February 2018. CFA Singapore will submit a collective response to SGX if there are substantive comments. If you would like your identity to be kept confidential, please let us know in your response to us.
  • Bangladesh Money Market Scenario and Outlook

    Source: Md. Nazmus Sakib
    Date Submitted: 11 Jan 2018
    Views: 806
    Downloads: 53
    Money market of Bangladesh has gone through some swift changes due to the backlash on the liquidity. Liquidity drag has been mainly occurred due to the extensive private sector credit growth keeping most of the banks’ advance deposit ratio (ADR) close to 85%. At least 12 commercial banks including the public banks have exceeded the existing ADR limit. Private sector credit growth was mainly fuelled by borrowers’ appetite for cheap fund and banks’ opportunity to generate profit. As a drive to squeeze the excessive private sector credit growth, Bangladesh Bank plans to curtail limit on advance-deposit ratio which will persuade banks to seek large deposits in short time. To pursue the objective, deposit rate needs to be attractive for all sorts of potential depositors. The impact is already apparent in the interest rates of banks. According to the industry participants, interest rate has gone up by around 1% already from October, 2017. Upward pressure on USD has also led to a critical scenario for retaining strong liquidity of BDT. Import of consumer goods has surged to a massive level due to shortage of food supply. Furthermore, import of capital machineries has also gone up as construction of large development projects are on the pipeline. Unless strong interference is initiated by Government, USD may escalate further and lead to squeezed liquidity. Interest rate is supposed to go up further in 2018.
  • 金融周期下的政策选择

    Source: 施东辉博士,上海证券交易所资本市场研究所所长
    Date Submitted: 08 Jan 2018
    Views: 155
    Downloads: 7

  • The Investment Opportunity in China’s “New Era”

    Source: Vania Pang
    Date Submitted: 08 Jan 2018
    Views: 117
    Downloads: 0
    A long-term economic roadmap for China has been set at the 19th Party Congress of China for the new era.
  • Korea Corporate Governance Symposium – ARX O2O Event, Korea, Seoul

    Source: Bruce Lee, CFA, Alan Lok, CFA
    Date Submitted: 19 Jan 2018
    Views: 935
    Downloads: 19
    This Autumn, leveraging on the iconic article by Dr Bruce Lee, CFA on Korea’s corporate
    governance (CG) scene the features on ARX, entitled “Corporate Governance Revolution
    3751.html, CFA Institute in collaboration with CFA Society Korea hosted a CG panel
    discussion with Dr Bruce Lee and three other practicing experts.

    The panel discussion was a full house event with more than 80 participants from the
    local CFA community.
  • Heterogeneity in how algorithmic traders impact institutional trading costs

    Source: Joseph Barbara
    Date Submitted: 10 Dec 2017
    Views: 151
    Downloads: 0
    Technology has fundamentally transformed how trading occurs on financial markets, but not everyone agrees that it is for the better.  Few changes in how securities are traded have ever generated as much debate and disagreement as algorithmic and high-frequency trading (AT and HFT).  On one hand, many academic and regulatory studies find that AT/HFT in aggregate is beneficial (e.g., lowering spreads and improving price discovery) or at worst benign. Yet, at odds with this view, many institutional investors claim that finding liquidity for large orders has become more difficult and their trading costs in contemporary markets are worse than before the technological advancements. 
    We reconcile these conflicting views using unique regulatory data for the Australian equities market. We show that behind the aggregate effects of algorithmic and high-frequency trading (AT/HFT) lies rich heterogeneity in the effects of individual traders/algorithms.  We find that the most harmful traders double the costs of executing institutional parent orders.  Beneficial traders offset much of this increase.  HFTs are no more likely to increase institutional trading costs than non-HFTs. We identify other characteristics that distinguish harmful and beneficial traders.  The paper explains why AT/HFT appear detrimental to some investors despite being beneficial or benign in aggregate.

    The paper can be obtained here:

  • SGX Consultation Paper on Enhancements to Continuous Disclosures

    Date Submitted: 08 Dec 2017
    Views: 1196
    Downloads: 0
    Singapore Exchange (SGX) has proposed to recalibrate disclosure requirements under the Listing Rules for areas of concern to both the market and the exchange.
    These changes cover the following areas:
    1. Secondary fund-raising
    ◾Additional upfront and prominent disclosure of the discount, ratio and other principal terms for rights issues.
    ◾A directors’ statement on why the rights issue is in the best interest of the issuer and their basis for forming such a view including justification for any discount.
    ◾Additional disclosure of the use of proceeds and intended use of unutilized amount if a rights issue takes place within a year of another fund-raising.
    ◾To announce specific usage of funds when disbursed if they were earmarked for “general working capital purposes” during the fund-raising exercise.
    2. Interested Person Transactions
    ◾Interested Person Transactions below S$100,000 are no longer exempted from announcements or shareholder vote.
    ◾Additional disclosure on the nature of the relationship with the interested person.
    ◾Identify the relevant director, CEO or controlling shareholder of the issuer who will be covered by the IPT mandate.
    3. Significant transactions and loans
    ◾Additional disclosures for loans that are not part of the issuer’s ordinary course of business.
    ◾Explanation on why no valuation was done for an acquisition or disposal of assets that is a major transaction except if the transaction involved shares.
    ◾Appointment of a competent and independent valuer for significant asset disposals.
    Detailed information can be found on the below official hyperlinks:
    We would appreciate if interested members could leave your comments on ARX or email me by 06th January 2018. CFA Singapore will submit a collective response to SGX if there are substantive comments. If you would like your identity to be kept confidential, please let us know in your response to us.
    Thank you.
  • MAS Consultation Paper on Execution of Customers' Orders

    Date Submitted: 06 Dec 2017
    Views: 1093
    Downloads: 0
    The Monetary Authority of Singapore (MAS) is proposing to: 
    - formalize expectations for holders of a capital markets services (CMS) licenses, banks, merchant banks and finance companies to have in place policies and procedures to place and/or execute customers’ orders on the best available terms to support fair outcomes for customers; and
    - enhance the existing business conduct requirements, applicable to CMS licensees, banks, merchant banks and finance companies, relating to handling of customers’ orders. 

    Specific Questions:
    1.    MAS seeks comments on the Best Execution requirements in the draft Notice and the draft guidelines to the Notice, set out in Annex 1 and 2.
    2.    MAS also seeks comments on the handling of comparable customers’ orders requirement set out in the draft notice. 

    Both Annex 1 and 2 are to be found on the below official hyperlink:

    We would appreciate if interested members could leave your comments on ARX or email to me by 13th December 2017. If you would like your identity to be kept confidential, please let us know in your response to us. Thank you.
  • Who Should Regulate Investment Advisers?

    Source: Dr Ben Charoenwong, Dr Alan Kwan, Dr Tarik Umar
    Date Submitted: 04 Dec 2017
    Views: 2814
    Downloads: 22
    We study the change in a jurisdiction of state and federal investment adviser regulators on investment adviser misconduct in the United States. Compared with advisers who did not experience the re-jurisdiction, we find evidence suggesting that misconduct increased after mid-sized investment advisers were required to switch from SEC to state regulation.
  • CFA Societies Australia: Submission to the Australian Investment Securities Commission on the National Financial Literacy Strategy

    Source: Susan Morey
    Date Submitted: 11 Dec 2017
    Views: 6586
    Downloads: 22
    CFA Societies Australia: Submission to the Australian Investment Securities Commission on the National Financial Literacy Strategy
  • Effects of Chinese Imports on U.S. Firm Innovation: Evidence from the US-China Permanent Normal Trade Relation

    Source: Yuxi Wang, Huasheng Gao
    Date Submitted: 28 Nov 2017
    Views: 71
    Downloads: 3
    We examine the effect of United States’ conferral of Permanent Normal Trade Relations (PNTR) on China—a policy that eliminates the uncertainty of future tariff increases associated with Chinese goods— on U.S. firm innovation. We find a significant increase in the number of patents and patent citations for U.S. firms that are affected by PNTR relative to firms that are not affected. This result is stronger for industries that experience a greater increase in Chinese goods following PNTR. Overall, our evidence suggests that Chinese imports induce U.S firms to invest more in innovative technology. 
  • Asset pricing implications of your mutual fund manager's constraints

    Source: Pratish Patel, Brian Ayash, Ziemowit Bednarek
    Date Submitted: 26 Nov 2017
    Views: 72
    Downloads: 1
    By the end of 2015, U.S. mutual funds managed $15 trillion in assets. These funds control about 25% of the equity and 40% of the commercial paper market. As a result, regulations affecting these funds have asset pricing implications. In this paper, we analyze the liquidity management constraint imposed on these funds by the Investment Company Act of 1940. Due to the Act, some funds do not trade illiquid stocks. The non-tradability of these stocks leads to sub-optimal risk sharing. In a competitive equilibrium, we show that this constraint generates the ``betting against beta'' phenomenon. Moreover, because of this constraint, alpha is non-zero in general. Adding factors to eliminate alpha is therefore a futile exercise. Lastly, we empirically corroborate the theory by offering an alternate explanation of the distress risk anomaly. 
  • AFM - Order Exposure in High Frequency Markets

    Source: Bidisha Chakrabarty, Terrence Hendershott, Samarpa Nawn, Roberto Pascual
    Date Submitted: 26 Nov 2017
    Views: 25
    Downloads: 0
    Theory predicts that uninformed traders hide limit orders to avoid free-option risk while informed traders hide to delay information revelation. Evidence from non-high frequency markets supports the free-option narrative. We advance the study of order exposure to high frequency markets. Using detailed data that identify hidden order placement by high-frequency traders (HFTs) vis-à-vis other algorithmic and non-algorithmic traders, we find that HFTs use small share sizes to hide orders near the best quotes. HFTs’ hidden orders have shorter time to completion, higher fill rates, lower implementation shortfall, and overall lower information content. Collectively our results show that extant models do not explain the order exposure choice of HFTs and calls for new theory. In that direction, we test and find that compared to other trader groups, HFTs’ aggressive hidden limit orders more often undercut standing orders at or near the best quotes.
  • MAS Consultation Paper on Liquidity Risk Management for Fund Management Companies

    Date Submitted: 19 Nov 2017
    Views: 259
    Downloads: 0
    The Monetary Authority of Singapore (MAS) proposes to introduce a liquidity risk management framework in the form of guidelines for fund management companies with respect to the collective investment schemes (CIS) that they manage.  The framework seeks to provide guidance on sound practices in liquidity risk management of CIS to address the risks to investors from potential liquidity mismatches between the CIS' portfolio liquidity and redemption terms. MAS also proposes to amend the Code on CIS to impose additional portfolio requirements for money market funds due to their systemic relevance in the event of a crisis. MAS has issued a consultation paper and we would like to invite CFA members to submit their feedback for a collective response to this consultation paper.  
    Please click on the link below for the Consultation Paper on Liquidity Risk Management for Fund Management Companies: and Publications/Consultation Papers/Consultation Paper on Liquidity Risk Management Guidelines_26 Oct 2017.pdf

    We would appreciate if interested members could leave your comments by 25 November 2017. If you would like your identity to be kept confidential, please let us know in your response to us. Thank you.