asean exchange common gateway
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ASEAN COMMON EXCHANGE ASEAN COMMON EXCHANGE
GATEWAY GATEWAY
For 3rd OIC Member States’ Stock Exchanges Forum -October 2009
Bursa Malaysia Berhad (“the Company”) reserve all proprietary rights to the contents of this Presentation. No part of this Presentation may be used or reproduced in any form without the Company’s prior written permission.
This Presentation is provided for information purposes only. Neither the Company nor the Presenter make anywarranty, express or implied, nor assume any legal liability or responsibility for the accuracy, completeness or currencyof the contents of this Presentation.
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Source : NYSE Euronext- ASEAN Exchanges Info Pack
The ASEAN 2015 Vision
The ASEAN Economic Community Blueprint envisionscapital market integration by 2015. Through freer movementof capital, ASEAN nations will see an increase in regionaleconomic prosperity and stability, as well as a reduction inthe development gaps among member states.
ASEAN nations offer a unique blend of opportunities andpotential for both regional and international investors:
– an abundance of agriculture and mineral naturalresources including rice, cocoa, palm oil, rubber,coal and nickel
– rapidly developing manufacturing and servicessectors
– growing consumer base and young and dynamicworkforce
– sound macro fundamentals – current accountsurpluses, low leverage levels
Statistics
– A population of 500 million
– Total domestic market capitalization of US$1.4trillion
– Over 3,000 listed companies
– Total economic size of US$1.24 trillion (thirdlargest next to Japan and China)
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BACKGROUND - ASEAN EXCHANGES VIA ASEAN ALLIANCE
In 2005 ASEAN Finance Ministers agreed to develop aninterlinked ASEAN securities market by 2015 through
greater cross-border investments, capital raising andtrading and harmonization of equity markets
An ASEAN Exchanges Strategic Working Group (SWG)comprising senior representatives from six participatingcountries namely Indonesia, Malaysia, Philippines,Singapore, Thailand and Vietnam was established in
January 2008 to work on ASEAN Trading link.
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TO FORM ASEAN ALLIANCE, ASEAN EXCHANGES NEED TO
AGREE ON KEY OBJECTIVES AND PRINCIPLES
ASEAN exchanges wish to form alliance in order to :- Encourage more intra-ASEAN cross border trading
Strengthen ASEAN capital markets’ presence andenhance the visibility of ASEAN as an asset class
Attract more international funds into ASEAN
Key
objectives
Maintain liquidity in home markets
Gain support from local brokers in both home and foreignmarkets
Provide ways to monitor trading volume for central bankand/or relevant authorities
Principles
DetailsAreas
Source: SWG analysis
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• Enhance the visibility of ASEAN as an asset class
• Easy and cost-effectiveaccess to ASEAN regionfor both information andtrading activities
• Provide opportunities for
local companies to raisefund from regional capital
BUSINESS MODEL SHOULD DERIVE FROM AGREED
OBJECTIVES, PRINCIPLES, CLEAR AND STRONG VALUE
PROPOSITION
Infrastructure
• ASEAN Bulletin Board
• ASEAN CommonExchange Gateway
(ACE) to facilitate crosstrading whilemaintaining liquidity inhome markets andgaining home and
foreign participants’
supports
• Depository link toprovide corporate
action and custodianservices
Value proposition Target customers
• ASEAN brokerage firms
• ASEAN investors
• Global brokerage firms• Global institutionalinvestors
Source: SWG analysis
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STRATEGIC OBJECTIVES
Make ASEAN exchanges grouping a significant player among the exchanges
Decrease overall cost of operations and technology
by creating common gateway
Facilitate exchange member access across exchangesespecially mid-tier stock brokers
Increase value of listed companies to prevent drift toother markets
Collaborations help achieve some benefits of M&A andstill maintain individual exchange’s identity
Cross-border corporate action services
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TRADING LINK: BUSINESS REQUIREMENTS
Order flow and data dissemination
Buy order
Deal confirm
Buy order
BMBMSETSET IAN*
Broker T
IDXIDX
PSEPSE
Broker B
ACEACE ACEACE
Traded prices& order book
>> Clearing& Settlement
Dealconfirm
Client
Dealconfirm
Buyorder
Risk Mgmtscreening
Deal confirm
HOSEHOSE
SGXSGX
ACEACE
ACEACE
ACEACE
ACEACE
Source: SET analysis
Dealconfirm
Buyorder
*Intra-ASEAN Network
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ASEAN EXCHANGES WITHOUT ACE GATEWAY….
Local Member
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… AND WILL LOOK LIKE THIS AT THE END STAGE
Local Member Common ASEAN Gateway
Connecting to other markets/external investors
Intra-ASEAN
Network
Source: TWG; SWG analysis
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10
1,085,824
Bermuda SEMalta SE
Mauritius SEColombo SE
Cyprus SELjubljana SE
Budapest SENew Zealand Exchange
Amm an SEBuenos Aires SE
Lima SETehran SE
Irish SELuxembourg SE
JasdaqEgyptian Exchange
Wiener BörseAthens Exchange
Colombia SEWarsaw SE
Osaka SEOslo Børs
Santiago SETel Aviv SEIstanbul SE
Mexican ExchangeTaiwan SE Corp.
Shenzhen SEBorsa Italiana
Johannesburg SEKorea Exchange
NASDAQ OMX NordicSIX Swiss Exchange
National Stock ExchangeBM&FBOVESPA
Australian SEBombay SE
ASEANBME Spanish Exchanges
Deutsche BörseTSX Group
Hong Kong ExchangesShanghai SE
London SENYSE Euronext (Europe)
NASDAQ OMXTokyo SE
NYSE Euronext (US)
ENHANCE VISIBILITY OF ASEAN MARKET (1/2)
Source: WFE; SWG analysis
Total market capitalization of
ASEAN exchanges is ranked 11th
among WFE members
Rank of market capitalization of ASEAN exchanges (USD million)
As of August 2009
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11
364,690
Malta SEBermuda SEMauritius SE
Luxembourg SEColombo SELjubljana SE
Cyprus SEBuenos Aires SE
Lima SETehran SE
New Zealand ExchangeAmm an SE
Colombia SEBudapest SE
JasdaqIrish SE
Santiago SEWiener Börse
Warsaw SEEgyptian ExchangeAthens Exchange
Mexican ExchangeTel Aviv SE
Osaka SEOslo Børs
Bombay SEIstanbul SE
Johannesburg SEBM&FBOVESPA
ASEANNASDAQ OMX Nordic Exchange
National Stock Exchange IndiaSIX Swiss Exchange
Australian SEBorsa Italiana
Taiwan SE Corp.TSX Group
Hong Kong ExchangesBME Spanish ExchangesKore a Exchange
NYSE Euronext (Europe)Deutsche Börse
Shenzhen SELondon SE
Tokyo SEShanghai SE
NYSE Euronext (US)NASDAQ OMX
ENHANCE VISIBILITY OF ASEAN MARKET (2/2)
Source: WFE; SWG analysis
Total trading value of ASEAN
exchanges is ranked 19th
among WFE members
Rank of trading value of ASEAN exchanges (USD million)
As of August 2009
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CHALLENGES
Different market sizes
Different trading systems
Different pre & post trading rules
Different readiness level for infrastructures e.g DMA
Different languages
Geographical & time difference
Cross-border regulation
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BILATERAL TRADING LINK MODEL
1. Allows Home Exchange and Participating Exchange investors tobuy and sell securities from the other country via their tradingnetworks
2. Home market rules prevail:(a) observe home market rules(b) regulatory enforcement and investigation
(c) preserve home jurisdiction and minimises duplication of regulation
3. Single order book – Liquidity within the home market
4. Clearing and settlement are intermediated by Home Exchangeparticipants
5. Home Exchange participants set the trading limit and managethe risk management
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CRITICAL SUCCESS FACTORS
Government backing
Harmonization of rules
Proactive pilot group
Promotion & Marketing
Active participation from the industries
Successful bilateral follow by multi-lateral linkage
Keep the scope simple first; expand later