2008 Predictions for Asia's Electronic Trading Industry
Well it's a New Year, at least as far as the Gregorian calendar is concerned (Chinese New Year falls on February 7 and the Islamic New Year on January 10). With every new year comes the promise of dreams, new goals and predictions. I thought it would be a great way to start the new year. After all, what credible journal doesn't make any predictions this time of year? I will focus on electronic trading in Asia of course, nothing about the middle east, the next US president or global recession.
Well let's start with an easy one. The China Financial Futures Exchange (CFFEX) will finally launch its long awaited Shanghai Shenzhen 300 Index (CSI300). I am even going to say Q2 of this year when it will finally begin trading. They have been talking about it all of last year and keep pushing the launch date back. I even wrote an article on it in the August Issue of the Asia Etrader. I suppose if you have been following it like I have this one is a no-brainer.
Securities and Exchange Board of India (SEBI) will finally allow foreigners to trade directly into India's electronic exchanges. What has been happening up until now is that each electronic trades sent overseas to India has to be approved by a licensed representative manually. As you may have guessed (or may have experienced) this is slow in modern electronic trading terms. One of the worst kept secrets is that Independant Software Vendors (ISVs) have been simulating trade approval by holding orders for a few seconds then sending them on to the exchange.
Newedge, the newest brokerage firm spawned from the merger of Calyon Financial and Fimat will have lacklustre results this year despite continued growth in trading volumes in 2008. Consolidation of operations, layoffs and not to mention egoes should hamper performance this year. Vendors like GL Trade and Patsystems should expect Newedge to give back some screens.
I have also just predicted above that trading volumes in Asia will increase again this year. Hong Kong stock option trading volume has gone through the roof in H2 last year and will show no signs of abating. India is expanding it's product offering by offering REITs this year. Interest in Vietnam is increasing. Bursa Malaysia is upgrading iself to FIX4.4 and plans to relaunch its moribund options market. Korea plans to lower barriers to foreigners trading her markets. The Dubai International Financial Exchange (DIFX) has the largest Sukuk (Sukuk are asset-backed, stable income, tradable and Shari'ah compatible trust certificates) listings in the world and demand for these products is on the rise. With HSBC, the DIFX has even launched a Sukuk Indices last October. Asia seems to be steaming along with a rosy 2008 very likely.
Regional deal-making looks to be on the cards for the Exchanges in 2008. They have been watching thier Europen and US counterparts buying each other up last year and will look to ally with or protect themselves against these juggernaut exchanges. Korea, with the worlds largest option contract, the KOSPI 200, stands to be courted by the likes of the Chicago Mercantile Exchange the worlds largest exchange. Hong Kong's Securities and Futures Commission signed an MOU with SEBI last May paving the way for a future partnership.
For those of you in the FIX community you would know about FIXATDL ( FIX Algorithmic Trading Definition Language). FIXATDL will allow firms to create specific algorithmic order types in a proprietary industry standard format called XML. This will allow buy-side clients to trade new order types rapidly. This standard is expected to be launched in Q1 2008 and already has the backing of several industry particpants including broker dealers. I believe this new standard will be cautiously accepted but will be slow to market. The industry will be hesitant to allocate resources to an unproven standard and will likely take a wait-and-see approach. I do think that a software development firm will build its fortunes from implementing FIXATDL but that won't come until at least 2009. Could be a good start-up.
Like 2007, 2008 promises to be an exciting year not only in our industry but all over the world. The Olympics in China, a new president in the US and even peace in the middle east. There will undoubtedly be some losers this year too but hopefully you are on the otherside of the trade. Happy and prosperous 2008.
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