Deutsche Bank Equities Global Market Structure Asia Pacific Newsletter

Issue 30, 2013 Welcome to the APAC Market Structure Newsletter containing the news relating to market microstructure,exchange updates and regulatory developments.

Hong Kong ...... Page 2 SFC notice on placements Launch of CES 120 contracts China...... Page 5 China Everbright error draws attention to risk control framework Shenzhen revises trading rules Taiwan...... Page 8 Securities firms permitted to establish off shore entities TWSE to change disclosure of market data India...... Page 10 SEBI releases norms for AIFs SEBI empowered to search and sieze Japan...... Page 14 JFSA confirms start date for short sell changes TSE to run pilot on new tick sizes South Korea...... Page 16 KRX release algo management plan for derivatives Chi-X and SBI Japannext in running for alternate platform technology

Australia...... Page 19 Summary of ASIC changes to MIR on dark pools and HFT Changes to ASX and Chi-X order types

ASEAN...... Page 23 SGX consults on lowering standard lot size to 100 Bursa Malaysia allows an additional 71 stocks to be short sold

Quant Fact Sheet...... Page 26

Contact: Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure Hong Kong Newsletter Issue 30

Hong Kong Market Structure Update Fig 1: Equities Hong Kong market monthly ADT (lit, auction & non-displayed order types) 10.00 9.00 Total (USD$) %loss/gain 2011 2012 2013 8.00 Monthly ADT (July 2013) USD$5.11bn 27.84% 7.00 Source: Thomson Reuters, 2013 6.00 5.00

Premature selling of placing shares may constitute illegal short (USD bn) selling 4.00 3.00 In a news announcement released on 1st August, the SFC has released 2.00 a Note that highlights the need for investors and intermediaries to 1.00 understand when a placement has completed or they may face criminal 0.00 sanctions. The following points were made: JanFeb Mar Apr May Jun Jul AugSep Oct NovDec Source: Thomson Reuters, 2013 — Some placees, who sold shares for which they had subscribed, appear to have taken the mistaken view that the trade would not amount to Fig 2: Futures HKFE HSI monthly ADT illegal short selling even if they did not have the shares when they 16.00 2011 2012 2013 placed the sell order provided that they could settle the trade on the 14.00 settlement date with the shares that had been allotted to them. 12.00 — Some placees took the erroneous view that they could sell the placing shares before the complement of a placement by relying on oral or 10.00 8.00 written confirmations from their placing agent about the quantity of (USD bn) shares they would be allotted as guarantees that the same number of 6.00 placing shares on the completion date to settle the trades. 4.00

— Prior to completion, a placement is subject to i) the Listing Committee 2.00 of the Stock Exchange of Hong Kong Limited (“SEHK”) granting the 0.00 listing of, and permission to deal in, the placing shares; and (ii) the JanFeb Mar Apr May Jun Jul AugSep Oct NovDec

SEHK does not revoke such listing and permission. Therefore the SFC Source: Bloomberg, 2013 takes the view that placing shares will continue to be conditional until completion of a placement. — Under the SFO, a person shall not sell securities unless he has or, where he is selling as an agent, his principal has; or he believes and Risks and uncertainties facing the Hong Kong market has reasonable grounds to believe that he has or, where he is selling a) Movements of capital flows – although there have been a number as an agent, that this principal has, a presently exercisable and of record highs, sudden reversals of capital flow may be triggered, unconditional right to vest the securities in the purchaser of them. causing significant corrections in the stock markets. (USD bn) — Therefore if a placee sells conditional placing shares before the b) Scaling back of Fed stimulus – If there is an unexpected spike in completion of a placement, the person runs the risk of committing interest rates caused by the Fed’s stimulus withdrawal, in illegal short selling unless there is already a sufficient holding to settle stock and asset prices is likely to increase. the trade. c) Global macro risks – The outlook for global economic growth remains Head of Enforcement Mark Steward stated uncertain.

“Investors and other market participants need to be aware of the d)Source: Debt Thomson sustainabil Reuters, 2012ity – In the US, investors may be concerned about the consequences if they sell shares they do not yet hold or own. In some country’s debt ceiling. In Europe, the sovereign debt problem has been cases, this may constitute naked short selling which is against Hong complicated by political uncertainties. In Japan, the high level of public Kong law.” debt may cause surges in yields and sovereign downgrades, which For the full notice see here: could affect asset prices. http://www.sfc.hk/edistributionWeb/gateway/EN/news-and-announcements/news/ e) Possible slowdown in Mainland economic growth – Investor sentiment doc?refNo=13PR73 may be affected by worries about a possible economic slowdown and uncertainties about the country’s monetary policy outlook. Half-yearly SFC report on global and local securities markets (USD bn) In a wide ranging report titled ‘Research Paper No 53: Half Yearly review of the global and local securities markets’, the SFC has considered a number of indicators in the market to provide a snapshot of the current market. Some key points on the equities market include:

Source: Thomson Reuters, 2012 Hong Kong Market Structure Monthly Newsletter 3

Trading activity in the local stock market 8th April – No of % of market Intraday Intraday 30th June contracts vs trading volatility in volatility Average daily turnover (HK$ billion) during AHFT in normal % change over normal session 1H 2H 1H sessions 2013 2012 2012 1H 2H 2012 2012 HSI futures 3,277 3.9% 0.8% 1.4%

HSI HSCEI 2,547 3.3% 1.0% 1.9% (ex H-shares 10.5 (15%) 8.3 (16%) 8.6 (15%) 26% 21% & red chips) The full report can be accessed here: http://www.sfc.hk/web/EN/files/SOM/RS%20Paper/EN/RS%20paper%2053.pdf Mainland 26.4 (39%) 20.8 (41%) 21.8 (38%) 33% 21% Stocks H-shares 18.7 (27%) 14.9 (29%) 15.7 (28%) 32% 20% Personnel Changes Red chips 7.7 (11%) 5.9 (12%) 6.1 (11%) 33% 26%

Derivative 8.7 (13%) 5.9 (12%) 7.4 (13%) 47% 17% Changes in Senior Executives Warrants Gary Jones has been appointed as the new head of the LME with a start Callable date of 30th September. He will also be appointed to the LME Board bull/bear 5.7 (8%) 5.5 (11%) 7.0 (12%) 5% -18% contracts (pending the approval of the Financial Conduct Authority in the HK). Mr. Jones will also take the role of Co-Head of HKEx’s Global Markets. Others 17.0 (25%) 10.6 (21%) 11.9 (21%) 48% 43% The Deputy Chief Executive of the LME, Mr. Diarmuid O’Hegarty, has Market total 68.3 (100%) 51.1 (100%) 56.7 (100%) 34% 20% submitted his resignation effective after a six month notice period.

Short selling Venue News The report notes there was an increase in the first half of 2013 vs H2 2012 in both absolute and as a percentage of total market. The average daily short selling amounted to HK$6,793 million or 10% of the total market in HKEx launches CES 120 Futures H1 2013 compared with HK$4,641 million or 9.1% in H2 2012. As of 28th June 2013, the aggregated short position amounted to HK$177.1 billion On 12th August, trading commenced in the CES China 120 (‘CES (or 1.3% of the market cap of the reported stocks). 120’) futures. Developed by the China Exchanges Services Company Ltd. (‘CESC’) who is jointly owned by the HKEx, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, it will track the performance of the largest China and Hong Kong stocks taking A shares, H shares, red chips and private enterprises as constituents.

The key features of the CES 120 are as follows: Contract Multiplier: $50 per whole index point Minimum Fluctuation: 0.5 index point (or $25) Contract Months: Spot month, the next calendar month and the next two calendar quarter months (calendar quarter months are March, June, September and December) Trading Hours: 9:15 am – 12 noon IPOs and 1 pm – 4:15 pm (Hong Kong time, or HKT), except on Last Trading There were 23 IPOs in H1 2013 raising HK$39.5 billion vs 32 IPOs H1 Day, or LTD 2012 raising HK$30 billion and 32 H2 2012 raising HD$59.2 billion. Trading Hours on LTD: 9:15 am – 12 noon Mainland company listings accounted for 89% of the market during H1 and 1 pm – 3:00 pm (HKT) 2013 with the HKEx global IPO ranking falling to 6th in H22013 (down Note: No afternoon trading on Christmas Eve, New from 4th in H2 2012). Year’s Eve or Lunar New Year’s Eve ETFS Holiday Schedule: Hong Kong holiday schedule 10 additional ETFs were listed in H1 2013 taking the total to 110. Their Block Trade Minimum: 100 contracts average daily turnover was HK$4.5 billion, 80% higher than the HK$2.5 Liquidity Providers: IMC Asia Pacific Ltd, Newedge Financial Hong billion in H2 2012. ETFs account for 6.7% of the total market turnover, up Kong Ltd, Optiver Trading Hong Kong Ltd from 4.9% in H2 2012. After hours futures trading (‘AHFT’) session at HKEx The new session that commenced at the HKEx on 8th April made the HSI and HSCEI futures available for trading from 5:00 – 11:00pm HK time. More than 100 brokers have participated in these sessions, to follow are some of the key statistics. Hong Kong Market Structure Monthly Newsletter 4

The contract specifications are Margin rates are as follows:

Underlying Index/Index CES China 120 Index (the share price index of that Futures Margin Initial Margin (HK$) Maintenance Margin name compiled, computed and disseminated by China Contract Rate (HK$) Exchanges Services Company Limited) CES Full Rate 12,000 /lot 9,600 /lot Contract Multiplier HK$50 per index point China Spread 3,600 /spread 2,880 /spread 120 Index Contract Months Spot month, the next calendar month, and the next two Rate calendar quarter months (i.e. quarterly months are March, Futures June, September and December) For the full HKEx announcement click here:

http://www.hkex.com.hk/eng/newsconsul/hkexnews/2013/130724news.htm Minimum Fluctuation 0.5 index point Maximum Fluctuation Nil Changes to Designated Securities for Short Selling Contracted Price The price at which a CES China 120 Index Futures The below 17 stocks have been added to the list effective from 9th Contract is registered by the Clearing House August: Contracted Value Contracted Price multiplied by the Contract Multiplier STOCK CODE ENGLISH SHORT NAME Position Limits 30,000 contracts 1. 382 WELLING HOLDING Large Open Positions 1,500 contracts 2. 531 SAMSON HOLDING Trading Hours 9:15 am – 12:00 noon and 1:00 pm – 4:15 pm (Hong Kong 3. 543 PACIFIC ONLINE time) 4. 710 VARITRONIX INTL There is no afternoon trading session on the eves of 5. 715 HUTCH HARB RING Christmas, New Year and Lunar New Year. 6. 858 EXTRAWELL PHAR 7. 1148 POWER XINCHEN Trading Hours on Last 9:15 am – 12:00 noon and 1:00 pm – 3:00 pm (Hong Kong 8. 1190 BOLINA Trading Day time) 9. 1314 TSUI WAH HLDG There shall be no afternoon trading session if the Last 10. 1600 TIAN LUN GAS Trading Day falls on Christmas Eve, New Year’s Eve or 11. 1900 CHINA ITS Lunar New Year’s Eve. 12. 2178 PETRO-KING Trading Method The Exchange’s Automated Trading System (HKATS) 13. 2200 HOSA INT’L 14. 3668 CHINALCO-CMC Final Settlement Day The first Business Day after the Last Trading Day 15. 6881 CGS Settlement Method Cash (Hong Kong dollar) settled contract for difference 16. 8008 SUNEVISION Last Trading Day The Business Day immediately preceding the last Business 17. 8292 HC INTL Day of the Contract Month If it falls on a Mainland China public holiday, the Last 19 stocks have been removed from the list Trading Day will be the preceding Business Day which is also a business day in Mainland China. STOCK CODE ENGLISH SHORT NAME Final Settlement Price The Final Settlement Price for CES China 120 Index 1. 18 ORIENTAL PRESS Futures Contracts shall be a number, rounded up to the 2. 28 TIAN AN nearest 1 decimal place if the figure in the second decimal 3. 201 MAGNIFICENT place is 5 or above and rounded down to the nearest 1 4. 256 CHINA HAIDIAN decimal place if it is below 5, determined by the Clearing 5. 317 GUANGZHOU SHIP House and shall be the average of the values of the CES 6. 343 CULTURECOM HOLD China 120 Index compiled, computed and disseminated 7. 577 LOUIS XIII H by China Exchanges Services Company Limited taken at 8. 581 CHINA ORIENTAL five (5) minute intervals between 1:00 pm up to 3:00 pm 9. 626 PUBLIC FIN HOLD on the Last Trading Day. 10. 900 AEON CREDIT The Chief Executive of the Exchange has the power under 11. 984 AEON STORES the Regulations for trading Stock Index Futures Contracts 12. 1008 BRILLIANT CIR to determine the Final Settlement Price under certain 13. 1733 WINSWAY circumstances. 14. 1938 CHU KONG PIPE 15. 2133 CH POLYMETAL Trading Fee (per contract Exchange Fee HK$10.00 16. 2383 TOM GROUP per side) The amount indicated above is subject to change from 17. 2722 CHONGQING M&E time to time. 18. 3335 DBA TELECOM Levies (per contract per Commission Levy and Investor Compensation Levy are 19. 3833 XINXIN MINING side) payable at the rate or of the amount prescribed from time ChinaAMC CES China A80 Index ETF (3180 & 83180.HK) were also added to time pursuant to the Ordinance. to the list eligible for listing from 26th Aug 2013 (their listing date). Note: CES futures will be exempt from Commission Levy from 12 August 2013 to 11 February 2014 both dates Sources inclusive www.sfc.gov.hk Commission Rate Negotiable www.hkex.com.hk www.hkma.gov.hk

Deutsche Bank Equities Global Market Structure Chinese Newsletter Issue 30

Chinese Market Structure Update Fig 1: Equities Chinese market monthly ADT (lit, auction & non-displayed order types) 70.00

Total (USD$) %loss/gain 60.00 2011 2012 2013

Monthly ADT (July 2013) USD$29,70bn 7.18% 50.00 Source: Thomson Reuters, 2013 40.00

China Everbright error draws attention to risk control framework (USD bn) 30.00

On 16th August, the China market was impacted by a number of 20.00 erroneous trades as can been seen in the Bloomberg graph below. In what was stated by Mei Jian, Everbright’s board secretary to be a 10.00 ‘technical glitch’ in the brokerages ‘arbitrage system’, China Everbright 0.00 trading placed incorrect buy orders totaling RMB 23.4 billion (US$3.8 JanFeb Mar Apr May Jun Jul AugSep Oct NovDec billion) that sent 16 major stocks to their 10% daily upper limit with RMB Source: Thomson Reuters, 2013 7 billion worth of shares changing hands in a matter of minutes. Fig 2: Equities Daily Turnover per venue - July 2013

25.00 Shanghai Shenzen 20.00

15.00 (USD bn) 10.00

5.00

0.00 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y Source: Thomson Reuters, 2013

Source: Bloomberg Fig 3: Futures HKFE HHI monthly ADT 5.00 The system used by the Strategic Investment Division (“SID”), under 2011 2012 2013 Yang Jianbo, created 26,082 buy orders moving the Shanghai Composite 4.50 Index up 5.62% compared to the previous days close. The system was 4.00 designed to resend orders if feedback had not been received within 150 3.50 seconds and it has been reported by Caixin that even after the issue had 3.00 2.50 been noticed, the traders could not stop the system and had to resort to (USD bn) cutting power. 2.00 1.50 The error caused Everbright to suffer losses of at least RMB 200 million 1.00 (US$32.6 million) despite efforts to manage the exposure down through 0.50 short selling of futures. The orders far exceeded the limit of RMB 80 0.00 million that Everbright had allocated to the SID that day, it has been JanFeb Mar Apr May Jun Jul AugSep Oct NovDec reported by Caixin that individual traders are not able to increase such Source: Bloomberg, 2013 limits independently. Fig 4: Futures Daily Turnover per venue - July 2013 The firm had further issues on the following Monday when there were further human errors causing issues in the bond market. There, 20.00 Everbright sold RMB 10 million of government bonds at a yield of 4.2%, HKFE HHI SGX FTSE China A50 25 basis points higher than the valuation on the previous trading day. 16.00 The counterparty agreed not to settle the deal. 12.00 The Chief Executive, Xu Haoming, has now stepped down and Yang Jianbo has been suspended. It was reported by the South China Morning (USD bn) 8.00 Post that this was due to the regulator, CSRC, taking a tough stance on brokerages, requiring them to strengthen internal controls while being 4.00 a stabilising force in a volatile market. Bloomberg quoted Song Jian, a based analyst at China Minzu Securities as saying that it may lead 0.00 to ‘the cleansing of the internal risk management systems at Chinese 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y brokerages as part of the government’s risk controls’. Source: Bloomberg, 2013 Chinese Market Structure Monthly Newsletter 6

As reported, Everbright Securities proprietary revenue rose 77% to RMB The statistics shows the number of cases increased 21% y-o-y in 165 million according to the broker’s annual report where a net income 2012, with another 40% increase of criminal cases in the first half of of RMB 1 billion on a revenue of RMB 3.6 billion in 2012. Everbright have 2013. The current CSRC law enforcement system is “challenging”, said now been banned from trading on a proprietary basis. Xiao. With 110 cases investigated every year, less than 60 cases end up www.scmp.com/business/companies/article/1298554/china-everbright-securities- with imposition of penalties, among which 30 are referred for criminal replace-president-following-trading investigation. http://www.bloomberg.com/news/2013-08-18/everbright-trading-error-adds-to-china- broker-s-woes.html CSRC examines onshore companies applying for HK listing According to local media report, CSRC claimed that it is examining 3 new QFIIs licenses approved by CSRC in July domestic companies who are applying for listing in Hong Kong. The list of The following 4 entities have gained QFII approval companies under investigation is not disclosed. 1. Newport Asia LLC CSRC data shows there are in total 179 onshore firms listing in Hong Kong or other overseas market with a market cap of US$192 billion as of 2012. 2. Hua Nan Investment Trust Corporation 3. Greenwoods Asset Management Hong Kong Limited M&A deals increased 60% in July An industry report from Zero2IPO revealed that China completed 102 US$1.5 billion quota approved by SAFE for 8 QFIIs in July M&A transactions in July, a surge of 59.4% compared with June. The Details of quota released are below: value of the 86 M&A deals that revealed their transaction figures totaled US$ 3.05 billion. 1. China International Capital Corporation Hong Kong Asset Management Limited, US$100 million CITIC Securities’ purchase of Credit Agricole’s CLSA unit was the largest deal in terms of transaction value. 2. China Everbright Assets Management Limited, US$100 million 3. Bosera Asset Management (International) Co., Ltd., US$100 million Re-financing of real estate companies restarts 4. BNP Paribas, US$150 million (additional) There are signs indicationg the ban on refinancing by listed developers 5. Bank Negara Malaysia, US$600 million (additional) since August 2009 as a measure to cool down the property market may be adjusted. A handful of real estate listed companies announced their re- 6. Cathay Securities Investment Trust Co., Ltd., US$150 million financing plan per notices released by the Shenzhen Stock Exchange. (additional) 7. The Trustees of Princeton University, US$100 million (additional) 8. Ontario Teachers’ Pension Plan Board, US$200 million (additional) Venue News As of 31st July 2013 quota of US$45 billion has been granted to 210 QFIIs in total (NB there are 232 licenses in total but not all currently SZSE revised trading rules have quota allocated). The CSRC announced on 12th July that the QFII program will be increased by a further US$70 billion. The Shenzhen Stock Exchange (“SZSE”) released the Shenzhen Stock Exchange Trading Rules (2013 Revision) (referred to as the “Revised Trading Rules”) on 28th July, 2013. The Revised Trading Rules improved the block trading system in Shenzhen market and allowed turnaround trades to be conducted for bond ETFs traded in the SZSE. The changes are summarised as below: 1. Lower entry requirements for the block trading The Revised Trading Rules have lowered entry requirements for block trading of A-share, B-share and Securities Investment Funds by 40%. In particular, for A-share block trading, the entry requirement has been lowered from 500 thousand shares or CNY 3million equivalents to 300 thousand shares or CNY 2 million equivalents. For B-share block trading, the entry requirement has been lowered from 50 thousand shares or HKD Source: Deutsche Bank, CSRC, SAFE 300 thousand equivalents to 30 thousand shares or HKD 200 thousand equivalents. For Securities Investment Funds block trading, the entry IPO reboot may be delayed to Q4 requirement has been lowered from 3 million units or CNY 3 million equivalents to 2 million units or CNY 2 million equivalents. According local media ECNS, CSRC may delay the IPO reboot to the 4th Quarter this year. 2. Introduce 2 new pricing mechanism for the block trading The delay may be due to the market conditions in the recent months. Currently, the block trading price is negotiated among buyers and sellers and confirmed in the purchasing agreement. To further enhance fairness and transparency of the block trading system, the Revised Trading Rules CSRC to strengthen enforcement on financial crimes have introduced 2 new after trading hour pricing mechanism, one is to Xiao Gang, head of CSRC vowed in an article to be stricter on the use market closing price as the block trading price, the other is to use the nation’s capital markets through stricter enforcement. The means will volume weighted average price as the block trading price. In addition, include increasing the penalty for malpractice and better protection for the SZSE will announce summarized block trading information for each whistleblowers with larger incentives. Compensation for victims will also according to the pricing mechanism on the stock exchange be increased. website, after market close. Chinese Market Structure Monthly Newsletter 7

3. Allow turnaround trades for bond ETFs The Revised Trading Rules have specified that turnaround trades for bond ETFs are acceptable, i.e. the bond ETF units purchased on T day could be sold on T day.

CES 120 Index Futures to be launched on HKEx The CES 120 was developed by China Exchanges Services Company Limited (CESC), a joint venture of HKEx, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, to track the performance of the largest and most liquid China stocks listed in Mainland China and Hong Kong. It includes A shares, H shares and red chips, as well as shares of private enterprises from the Mainland that are incorporated elsewhere and listed in Hong Kong. The CES 120 futures contract will be the world’s first exchange-listed derivatives product designed to provide a convenient, cost efficient and simultaneous exposure to leading China stocks from the Mainland and Hong Kong markets through a single exchange-traded futures contract that can be used for trading or hedging purposes. The contract will be an ideal risk management tool for institutions and individuals with the Mainland China-related equity exposure, including Exchange Traded Fund (ETF) market makers looking to hedge their positions in ETFs linked to Mainland China-related ETFs.

SSE and CSI to launch CSI Urbanization Indices The SSE and CSI announced the CSI Urbanization Indices will be launched on 26th August 2013. The detailed methodology can be found on the official website of SSE (www.sse.com.cn) and CSI (www.csindex.com.cn).

Source: www.csrc.gov.cn www.english.sse.com.cn www.hkex.com.hk www.ecns.cn www.chinadaily.com.cn www.menafn.com

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure Taiwan Newsletter Issue 30

Taiwan Market Structure Update Fig 1: Equities Taiwan market monthly ADT (lit, auction & non-displayed order types) 5.00 4.50 Total (USD$) %loss/gain 2011 2012 2013 4.00 Monthly ADT (July 2013) USD$2.36bn 4.72% 3.50 Source: Thomson Reuters, 2013 3.00 2.50

Securities firms able to establish off shore branches (USD bn) 2.00 As announced in the FSC’s ‘Important Measures’ in July 2013, securities 1.50 firms meeting certain criteria will be able to establish an offshore branch. 1.00 The branch will be able to operate a number of activities including 0.50 commission agency, brokerage, underwriting, agency business of 0.00 securities or other financial products and the buying and selling of JanFeb Mar Apr May Jun Jul AugSep Oct NovDec securities or other financial products denominated in foreign currencies. Source: Thomson Reuters, 2013 The requirements for qualification cover areas such as: Fig 2: Cash Equities Daily Turnover per venue - July 2013 — scale of operations 4.00 3.50 Taiwan ROC OTC — financial soundness 3.00 — comprehensive internal control systems 2.50

Tax provisions regarding tax preferences for offshore securities branch, 2.00 (USD bn) which will remain in effect for 15 years, were adopted with reference to 1.50 the current taxation system for offshore banking branches. 1.00

0.50

Revision on FINI application form starting from 22nd July, 2013 0.00 The Taiwan Stock Exchange (“TWSE”) announced the revision on 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y “Operation Directions for Applications by Overseas Chinese, Foreign Source: Thomson Reuters, 2013 Nationals, and Mainland China Area Investors for Registration to Invest in Domestic Securities or Trade Domestic Futures” has been effective from Fig 3: Futures FTX TAIEX monthly ADT 22nd July 2013. 9.00 2011 2012 2013 The revision has added two categories under “Section 3: Type of Applicant” 8.00 for non-fund type Foreign Institutional Investor (“FINI”) applicants. 7.00 6.00 1. Collective account for foreign employees of the offshore subsidiary or branch of a Taiwanese listed company or a primary listed company in 5.00 Taiwan. This applies to a Taiwanese company which is listed on the (USD bn) 4.00 TWSE, GreTai Securities Market (“GTSM”), and includes Emerging 3.00 Stocks, with more than one offshore subsidiary or branch to open a 2.00

FINI account respectively or jointly on behalf of their foreign employees 1.00 for the purpose of exercising share options, employee bonus shares, 0.00 cash capital increase and subscription right for treasury stocks. JanFeb Mar Apr May Jun Jul AugSep Oct NovDec 2. Share repurchase for a primary or secondary listed company in Taiwan Source: Bloomberg, 2013 Fig 4: Futures Daily Turnover per venue - July 2013

Offshore subsidiary or branch of a listed company may open a FINI 10.00 SGX MSCI Taiwan FTX TAIEX for their China employees 9.00 8.00 The TWSE announced that with immediate effect, offshore subsidiaries/ 7.00 branches of a Taiwanese company listed on the TWSE and GTSM 6.00 including Emerging Stocks are allowed to register a consolidated FINI 5.00 status with TWSE on behalf of their Mainland China employees. The (USD bn) 4.00 purpose of this account is for the Mainland China employees to acquire 3.00 securities which are transferred, subscribed by or distributed to them as 2.00 well as the consequent sale of the securities. 1.00 0.00 In addition, when there are two or more offshore subsidiaries/branches of

a Taiwanese company, it is allowed to open FINI accounts respectively, or 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y just open one consolidated FINI account. Source: Bloomberg, 2013 Taiwan Market Structure Monthly Newsletter 9

Venue News

TWSE’s enhanced market information disclosure mechanism The TWSE announced their plan to disclose the best 5 bid/offer reference price one trading minute (from 08:59 to 09:00am) before the market is open. Similar to the intraday volatility interruption system, if the reference price of a certain stock rises or falls more than 3.5 percent of the last reference, the TWSE will postpone matching this stock for two minutes i.e. the first trade will not be matched until 09:02am.

Weekly TAIEX Futures is launched on 31st July Taiwan Futures Exchange (“TAIFEX”) announced that weekly TAIEX Futures were launched on 31st July 2013. It is expected that there will be more FINI/FIDI participation in the Taiwan futures market after weekly TAIEX futures is launched.

Sources www.fsc.gov.tw www.twse.com.tw

Deutsche Securities Services

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure Indian Newsletter Issue 30

Indian Market Structure Update Fig 1: Equities Indian market monthly ADT (lit & auction types) 6.00 2011 2012 2013 Total (USD$) %loss/gain 5.00 Monthly ADT (July 2013) USD$2.07bn 0.03% 4.00 Source: Thomson Reuters, 2013 SEBI issues regulation norms for Alternative Investment Funds 3.00 (USD bn)

SEBI has released a circular with details on the operational, prudential 2.00 and reporting norms for Alternative Investment Funds (“AIFs”) which are funds established or incorporated in India in the form of a trust or a 1.00 company or a limited liability partnership or a body corporate, which is 0.00 a privately pooled investment vehicle, and collects funds from investors, JanFeb Mra AprMay nuJ luJ Aug Sep OctNov Dec whether Indian or foreign, for investing in accordance with a defined Source: Thomson Reuters, 2013 investment policy for the benefit of its investors and are not covered under the SEBI (Mutual Funds) Regulations. Fig 2: Equities Daily Turnover per venue - July 2013 Below are the major regulations that apply to the AIFs. 3.50 NSE India BSE India 3.00 — Category III Alternative Investment Funds may engage in leverage or borrow subject to consent from the investors in the fund and 2.50

subject to a maximum limit and will be regulated through issuance of 2.00 directions such as operational standards, conduct of business rules, prudential requirements, restrictions on redemption and conflict of (USD bn) 1.50 interest as specified by the Board 1.00

Risk Management & Compliance requirements for Category III AIFs 0.50 0.00 — To have a comprehensive risk management framework supported

by an independent risk management function and a strong and 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y independent compliance function appropriate to the size, complexity Source: Thomson Reuters, 2013 and risk profile of the fund appropriately supported by sound and Fig 3: Futures NSE Nifty monthly ADT controlled operations and infrastructure. 3.50 2011 2012 2013 — To maintain appropriate records of the trades/transactions performed and such information should be available to SEBI, whenever sought. 3.00 — To provide full disclosure and transparency about any conflicts of 2.50 interest that may arise from time to time and how they are managed 2.00

to both investors and SEBI. (USD bn) 1.50

Reporting Requirements 1.00

— Category I and II AIFs and the Category III AIFs which do not 0.50 undertake leverage shall submit report relating to their activity as an 0.00 AIF to SEBI on a quarterly basis in the prescribed format. JanFeb Mra AprMay nuJ luJ Aug Sep OctNov Dec — Category III AIFs which undertake leverage shall submit a report to Source: Bloomberg, 2013 SEBI on a monthly basis in the prescribed format. Fig 4: Futures Daily Turnover per venue - July 2013

— Reports shall be submitted within 7 calendar days from the end of 5.00 quarter/end of month as the case maybe. The reports for the period 4.50 NSE Nifty SGX Nifty up to the quarter ended June 30, 2013 for AIFs which are already 4.00 registered with SEBI shall be sent to [email protected] latest 3.50 by 29th August 2013. 3.00 2.50

Redemption norms for open ended Category III AIFs (USD bn) 2.00 — The fund manager shall ensure sufficient degree of liquidity of the 1.50 scheme/ fund in order to allow it to meet redemption obligations and 1.00 other liabilities at any time. 0.50 0.00 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Source: Bloomberg, 2013 Indian Market Structure Monthly Newsletter 11

— The fund manager shall clearly disclose the possibility of suspension SEBI is now working on ways to empower small investors and channel a of redemptions in exceptional circumstances (or if required by SEBI) to larger flow of household savings into the capital markets. It is considering investors in the placement memorandum. a ‘triple-A approach’ of spreading Awareness among investors, promoting Appropriate products and ensuring proper Audit of the marketplace. — The fund manager shall keep the investors and SEBI informed at all times on the steps planned/taken to restore normal operations SEBI is also considering a significant increase in its monetary penalties, and shall not accept any new subscriptions during the period of and steps like public censure, against the errant entities in the suspension. capital markets to deliver efficient supervision and deterrent against malpractices. Prudential requirements for category III AIFs employing leverage (Indian Hedge Funds) SEBI will bring the activities and offences related to front-running under the ambit of fraudulent and unfair trade practices (FUTP) regulations in a — Leverage shall be calculated as the ratio of the Total exposure to the bid to curb illegal activities. The FUTP norms will also treat fund-raising Net Asset Value of the AIF and should not exceed 2x NAV of the fund activities by those entities which don’t register as Collective Investment at any given time Schemes with SEBI as fraud. Leverage = Total exposure {Longs+Shorts (after offsetting as permitted)} http://www.thehindu.com/business/markets/govt-approves-proposal-to-give-sebi- Net Asset Value (NAV) more-powers/article4924547.ece http://zeenews.india.com/business/news/companies/sebi-looks-to-recover-penatlies- — All Category III AIFs shall report to the custodian on a daily basis the worth-rs-125-crore_80523.html amount of leverage at the end of the day (based on closing prices) and http://www.financialexpress.com/news/set-for-overhaul-sebi-mulls-threepronged- whether there has been any breach of limit during the day. approach/1151263 — In case of limit breaches, the same should be reported to the http://www.indianexpress.com/news/sebi-mulls-higher-penalties-public-censure-for- custodian, investors and SEBI and the excess exposure should be defaulters/1141689/ squared off before the end of next business day to adhere to the http://articles.economictimes.indiatimes.com/2013-08-12/news/41332696_1_sebi- prescribed limit. board-futp-securities-market-regulator-sebi — All AIFs shall ensure that all marketing documents of the fund/ scheme, if any, can be distributed on a private basis only to its SEBI probing broker-operator nexus/MCX-NSEL crash proposed investors and shall be in accordance with the placement SEBI has initiated a new probe after its integrated surveillance systems memorandum of the fund/scheme. highlighted certain instances where brokers were found to be leasing SEBI has also issued the guidelines for existing AIFs wanting to change their terminals to stock market operators who were using the trading their registration categories based on risk exposure. However, only system to create artificial volumes through “self-trade” in shares and those AIFs which have not made any investments in their existing manipulate prices. The price movements and volumes in these stocks category would be allowed to make an application to SEBI for such were unusual and not in line with the trends in the index or its peers, changes along with application fees of Rs 1 lakh and the rationale which caught the regulator’s attention. behind the proposed change. SEBI is also analyzing the transactions of a number of leading stock In case the AIF has raised funds prior to application for change in brokers to ascertain if they had diverted any “client-monies” meant for category, the AIF would be required to inform all its investors providing the Equity Trading segment to trade in the commodities/spot markets them the to withdraw their funds without any penalties. or had launched products designed like portfolio management services Also, the AIF would not be allowed make any investments other than to trade in the commodity markets for a fixed return. Regulatory norms in liquid funds/ banks deposits until approval for change in category is mandate that brokerages maintain a Chinese wall between their equity granted by SEBI. and commodities segments. The SEBI press circulars are available here – SEBI will also be probing the stock price crash in Multi Commodity Exchange (“MCX”) and its promoter Financial Technologies India Ltd http://www.sebi.gov.in/cms/sebi_data/attachdocs/1375094611151.pdf (“FTIL”). The regulator is also looking into the trading pattern of some http://www.sebi.gov.in/cms/sebi_data/attachdocs/1375870851852.pdf brokerages and other entities in the two stocks to ascertain whether they had any advance information about problems at NSEL. http://www.domain-b.com/investments/markets/sebi/20130729_alternative.html http://www.business-standard.com/article/markets/sebi-probes-broker-operator- http://articles.economictimes.indiatimes.com/2013-08-08/news/41202057_1_pooled- nexus-113072200882_1.html in-investment-vehicles-category-ii-aifs-aif-regulations http://articles.economictimes.indiatimes.com/2013-08-02/news/41008342_1_nsel- brokers-commodity-segment SEBI to get sweeping powers as government approves proposal to http://www.moneylife.in/article/sebi-initiates-probe-into-financial-technologies-mcx- crash/33895.html amend SEBI Act The government has approved a proposal to amend the SEBI Act which SEBI looks to revive the primary market, not to insist on safety-net will empower the markets regulator with sweeping powers to take on the market manipulators. With the introduction of these amendments, SEBI SEBI is working to fast-track the clearance of offer documents for public will be able to conduct search and seizure operations for attachment of issues and has also urged the investment bankers to price initial public assets, access call data records in respect to any securities transaction offerings (IPOs) at least 25% lower than the market price of listed peers in being probed by it and also crack down on ponzi schemes. The Ordinance a bid to revive the primary segment of the local capital markets. amending the Securities Laws was promulgated by President Pranab SEBI has also announced that it will not ‘informally’ insist issuers to Mukherjee. provide for a safety net for retail investors until a decision is taken and With the new powers being granted, SEBI now looks to recover penalties such a mechanism is formally introduced. upto Rs 125cr from errant entities which have not yet paid their dues. http://www.livemint.com/Money/pRnsBy3IwbSC60QSzK5vZL/Sebi-seeks-to-revive- “Earlier, we were able to bar companies from raising money, ban people IPO-market.html from taking directorship or impose penalty, but we have not been able to http://www.livemint.com/Money/9lYQalmxfgVo5AKEhhoWBN/Sebi-not-to-insist-on- recover the money. Now, we can recover the money.” SEBI chairman, U safety-net-provisions-in-IPOs.html K Sinha said. Indian Market Structure Monthly Newsletter 12

Venue Updates SEBI to setup a committee to align Private Placement norms with Companies Bill Markets witness high selling pressure during July SEBI will constitute a committee comprising members of the market regulator, the ministry of corporate affairs and members of the apex During the month of July, the local capital markets came under high body of chartered accountants which will look at plugging any regulatory selling pressure with Foreign Institutional Investors (“FIIs”) pulling out loopholes between the SEBI regulations on private placement and what US$3bn (Rs 18,500 Cr) worth of securities, while local mutual funds also is outlined in the Companies Bill, 2012. The move comes after a rising offloaded shares worth US$ 340mn (Rs 2,168 Cr). According to the SEBI number of instances of private placement being misused by various data, The FIIs withdrew Rs 12,081 crore (US$ 2 billion) from the debt entities for raising funds from the public have come to the Ministry of market and Rs 6,394 (US$ 1 billion) from equities. Corporate Affairs’ notice. http://timesofindia.indiatimes.com/business/india-business/FIIs-pull-out-Rs-18500- http://www.financialexpress.com/news/sebi-to-align-pvt-placement-norms-with- crore-from-Indian-capital-market-in-July/articleshow/21420997.cms companies-bill/1140757/0 http://zeenews.india.com/business/news/finance/mutual-funds-withdraw-rs-2-100-cr- http://www.business-standard.com/article/markets/govt-official-suggests-sebi-to-set- from-stocks-in-july_81256.html up-panel-on-private-placement-113071100714_1.html NSE back at world #1 position in terms of Equity Trading Volumes Mauritius looking to collaborate on Tax Treaty to allay Indian According to a WFE release, National Stock Exchange (“NSE”) of India concerns regained its number 1 position in terms of Equity Trading Volumes in The Mauritius government has offered to include a limitation of benefit June. NSE registered 11.2 crore trades on its platform, making it the clause (which can take many forms and need not necessarily be a world’s top exchange among the 50 bourses listed with WFE. NSE was monetary threshold) in the double taxation avoidance agreement with also ranked first in the number of equity trades for the first half of 2013 India but wants India to ensure that its general anti-avoidance rules with 71.18 crore trades. (“GAAR”) do not override the tax treaty. NYSE and Nasdaq OMX followed NSE at the second and the third positions respectively. NYSE Euronext and Nasdaq recorded 10.65 India has been trying to negotiate the double taxation avoidance crore and 9.88 crore trades in June, respectively in their equity segments. agreement with Mauritius for the past few years to check so-called BSE stood at the eighth place with 2.44 crore trades on its platform. round tripping and other treaty abuses though Mauritius has been reluctant to make any changes. Although since the proposal of General http://www.thehindubusinessline.com/markets/nse-regains-top-slot-as-worlds-largest- Anti-Avoidance Rules (GAAR) by the Ministry of Finance, the number bourse-for-equity-trade/article4927707.ece of investors looking to invest in India through Mauritius has slowed considerably. BSE to refund 90% of broker’s membership deposit http://www.livemint.com/Politics/DST9LjWFk804D9hbOIy3hJ/Mauritius-to-address- The Bombay Stock Exchange (“BSE”) has decided to refund 90% of concerns-over-tax-treaty.html the amount it had raised as membership deposit from stockbrokers after the completion of a three year lock-in period after it had slashed its Government sets up a panel to discuss tax issues with industry membership fees drastically in 2010 to counter competition from newer exchanges like MCX-SX. This is expected to cost BSE up to Rs 180 Cr and The Finance ministry has set up a panel under the leadership of Mr. will benefit approximately 200 broker members. Parthasarthi Shome for discussing tax related issues and disputes with the industry representatives. The panel will meet the representatives on a “We decided to refund the money to brokers since a three-year lock-in on weekly basis on every Wednesday and is intended to be a forum where the deposit is over.” BSE said. the industry can put forward their point of view to the government while http://articles.economictimes.indiatimes.com/2013-07-24/news/40771978_1_ the government can clarify the policy decisions. membership-deposit-base-minimum-capital-1-5-crore Shome would be supported by officers of the Tax Policy and Legislation (TPL) wing of the Central Board of Direct Taxes (CBDT) and the Tax BSE, NSE transfer more stocks to restricted categories Research Unit (TRU) of the Central Board of Excise and Customs (CBEC). Both the BSE and NSE through a series of notifications have notified http://timesofindia.indiatimes.com/business/india-business/Panel-to-take-up-tax- the lists of stocks that have been transferred to the restricted (Trade-to- issues-with-companies/articleshow/21152415.cms Trade) category where speculative trading is not allowed and delivery of the shares is mandatory. The action has been taken after these stocks SEBI may revive REITs were identified in a surveillance review conducted by the bourses as per directions from SEBI. BSE has moved a total of 41 scrips to the ‘T’ SEBI is revisiting the proposals to allow the formation of Real Estate category while NSE has transferred 11. Investment Trusts (REITs) in a bid to attract more foreign inflows and also to curb the pressure on gold imports. SEBI is currently planning to create http://www.thehindubusinessline.com/markets/stock-markets/bse-to-transfer-41- a new category on the AIF platform, enabling investors to subscribe to stocks-to-restricted-segment-from-aug-2/article4969914.ece units of REITs which will be listed and invest in rent-income-based real http://profit.ndtv.com/news/market/article-nse-to-shift-11-stocks-to-restricted-trade- estate assets. segment-325086 The regulator is proposing that 90% of the income from REITS be distributed as dividends every year, in line with the international BSE halves the circuit limit for MCX shares practices. Initially, investments in REITs will be restricted to institutions Following the steep decline in the price of the MCX shares (50 percent and high net worth individuals only and might be opened to retail decline after the NSEL announced suspension of certain contracts and investors at a later stage. delay in settlement time table by 15 days), the BSE has set the stock level http://www.thehindubusinessline.com/markets/sebi-makes-another-attempt-to-revive- circuit limit for scrip at 5 percent. The limit is effective from 8th August. reit/article4945879.ece Indian Market Structure Monthly Newsletter 13

http://www.thehindubusinessline.com/markets/stock-markets/bse-lowers-circuit-limit- to-5-for-mcx-shares/article4999769.ece

BSE signs MoU with Canadian university The BSE has signed a memorandum of understanding with the Digital Media Zone at Ryerson University of Canada (one of Canada’s largest incubators) to enable start-up companies of the two countries across sectors to access each other’s markets. http://articles.economictimes.indiatimes.com/2013-08-02/news/41008527_1_indian- institute-start-ups-mou

Personnel Moves

SEBI shuffles portfolios with EDs; reconstitutes the advisory committee on Mutual Funds SEBI has undertaken a major reshuffle of portfolios allocated to its top officials during an internal organizational restructure. Under the new arrangement, Mr. S.V. Murali Dhar Rao is now in charge of market regulation department and Mr. S. Ravindran is now be responsible for integrated surveillance department while Ms. Ananta Barua takes over the responsibility of heading investment management (mutual funds, PMS, FIIs, collective investment schemes and custodians). SEBI has also reconstituted the advisory committee on Mutual Funds which is mandated to advise on issues related to regulation and development of mutual fund industry. The 15-member committee is now headed by Janki Ballabh, former Chairman of SBI. The members of the committee include executives of various fund houses such as Birla Mutual Fund CEO A Balasubramanium, Tata Mutual Fund Chairman of the Board of Trustees(Independent Trustee) S M Datta, DSP BlackRock President & CIO S Naganath and Edelweiss Mutual Fund CEO Vikaas M Sachdeva, among others and also comprises of representatives from government and media. http://www.thehindubusinessline.com/markets/sebi-rejigs-portfolios-at-top-level/ article4921216.ece http://www.thehindubusinessline.com/markets/sebi-rejigs-advisory-committee-on- mutual-fund/article4923916.ece

Raghuram G Rajan appointed next Governor of the Reserve Bank of India The Reserve Bank of India (“RBI”) has announced the appointment of Raghuram G Rajan as the next Governor of India’s central bank effective from 4th September 2013 for a term of three years. Mr Rajan is currently the Chief Economic Advisor in the Finance Ministry. He is an alumni of IIM-Ahmedabad and IIT-Delhi, and completed his doctorate from the Massachusetts Institute of Technology. He was professor at the University of Chicago’s Booth School of Business before taking over as Chief Economic Advisor. He is also a former IMF chief economist and is credited with predicting the 2008 global financial crisis well ahead of its occurrence. http://www.bloomberg.com/news/2013-08-06/india-s-rajan-to-be-next-rbi-head-as- rupee-plunges-btvi-reports.html http://www.timesnow.tv/Rajan-appointed-next-Reserve-Bank-of-India-Governor/ articleshow/4433817.cms

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure Japanese Newsletter Issue 30

Japanese Market Structure Update Fig 1: Equities Japanese market monthly ADT (lit & auction types) 50.00 2011 2012 2013 Total (USD$) %loss/gain 45.00 40.00 Monthly ADT (July 2013) USD$32.53bn 12.70% 35.00 Source: Thomson Reuters, 2013 30.00 25.00 (USD bn) Short sell regulation changes to be implemented 5th November 20.00 The Japan Agency (JFSA) has responded to the public 15.00 comments made on the revised short sell regulations in April this year. 10.00 There is no material change compared with the consultation. Below are 5.00 the key changes. 0.00 JanFeb Mar Apr May Jun Jul AugSep Oct NovDec

Price Restrictions - Introducing a “trigger-system” Source: Thomson Reuters, 2013 — The price restriction will be triggered when a stock is traded at 10% Fig 2: Equities Daily Turnover per venue - July 2013 or lower price compared to the closing price of the previous trade 50.00 date. — The price, once triggered per above, will last till the end of the next 40.00 trading date. 30.00 Ban on Unlocated Short Selling (USD bn) —  The ban on short selling without locating the borrow (so called 20.00 Chi-X Japan Kabu Sapporo “naked” short selling in place since 2008) will be permanent. Fukuoka Nagoya SBI Japannext 10.00 Instinet Japan Osaka Short Selling Position Reporting and Disclosure — The position reporting requirement will also be permanent. 0.00 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y — The position reporting will be triggered at a position of 0.2% or Source: Thomson Reuters, 2013 more of the outstanding shares (currently 0.25% or more.) Fig 3: Futures OSE NIKKE monthly ADT — The position reporting will be publicly disclosed at a position of 0.5% or more of the outstanding shares (currently 0.25% or 25.00 2011 2012 2013 more.) One final disclosure will be made when the position falls below 0.5%. 20.00 — The change reports will be required for position movements for 15.00 0.1% or more after hitting the threshold of 0.2% or more. One final change report will be required when the position falls below 0.2%. (USD bn) 10.00 Proprietary Trading Systems (“PTS”) 5.00 — PTS executions will be subject to the ban of naked short selling, the price restrictions, and the duty to flag as short. 0.00 Enlarged Exemption JanFeb Mar Apr May Jun Jul AugSep Oct NovDec Source: Bloomberg, 2013 — Arbitrage between the public exchange and PTS will be included as Fig 4: Futures Daily Turnover per venue - June 2013 an exempted trade from the price restrictions. A wider scope of ETF 60.00 products will also be included in the exemptions. 20.00 50.00 — Restrictions on a so-called short selling facilitation trades which OSE NIKKEI SGX NIKKEI could mislead the market by appearing as a broker’s principal long 16.00 40.00 selling in the market with a crossing with a client’s short selling 30.00 order behind. 12.00 (USD bn) 20.00 To access the full announcement from the JFSA click here: 8.00 http://www.fsa.go.jp/news/25/syouken/20130821-3.html 10.00 4.00 0.00 0.00 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Source: Bloomberg, 2013 Japanese Market Structure Monthly Newsletter 15

Venue Updates Sources www.tse.org.jp www.ft.com Small Tick Pilot Programme http://www.atmonitor.co.uk/ The Tokyo Stock Exchange (“TSE”) will also be running a Small Tick Pilot www.japantimes.co.jp Programme in two phases where Phase 1 will be run from Jan to Jun www.bloomberg.com 2014 while Phase 2 will be run from Jul 2014 to mid 2015. Both phases www.nasdaq.com will run two different sets of tick sizes which will be applicable to all Topix http://www.ose.or.jp/ 100 stocks during the pilot program. www.telegraph.co.uk Once the phase 1 and 2 are over, the performance of both phases will be evaluated and target stocks and spread sizes will be determined for implementation from mid 2015 onwards in phase 3. Phase 3 is timed with TSE’s Next Generation trading system (Arrowhead).

TSE and OSE Cash segments merged 16th July Post the merger of the cash segments of TSE and the Osaka Stock Exchange (“OSE”), the OSE cash products were relisted on the TSE on 16th July and cash names on OSE start trading live on TSE. TSE has now emerged as the world’s third largest equities exchange by listed companies and handles more than 90% of the local equities trades.

Japan Exchange Group looking to combine TSE’s Mothers and OSE’s Jasdaq Japan Exchange Group Inc. will consider a future merger of the Tokyo Stock Exchange’s Mothers section and the Osaka Securities Exchange’s Jasdaq section, both of which are meant for enabling startups to tap the capital markets. “Through the integration, we aim to be the most preferred exchange in Asia. We will now need to address how to sort out overlapping functions of the Mothers and the Jasdaq. We aim to realign them after building a certain degree of consensus by taking a certain amount of time and following procedures” Akira Kiyota, president of TSE Inc Said. Also, Osaka Securities Exchange Co. may launch a commodity futures market on its own, without seeking an alliance with an existing operator in or outside Japan according to President Hiromi Yamaji.

Japan Exchange Group trading overview Cash Equity Market — In July 2013, average daily trading value of 1st Section domestic stocks was ¥2.2623 trillion, exceeding ¥2 trillion for 6 consecutive months since February 2013. — Trading value on the ETF market was ¥2.25 trillion (TSE and OSE combined), exceeding ¥2 trillion for 3 consecutive months. — Issues that were listed only on the former OSE or primarily traded on the OSE market, such as Nikkei Leveraged ETF (1570), GungHo Online Entertainment (3765), and Nintendo (7974), ranked highly in terms of auction trading value after market integration on 16th July. Derivatives Market — Total derivatives trading volume on JPX for the month was 26,843,867 contracts. — Monthly trading volume for the night session was 6,725,414 contracts. The ratio of night session to the day session trading volume was 38.5%. — The number of Nikkei225 options contract months and that of strike prices were increased on July 16. As of the end of July, trading volume of these new contracts accounted for 18.1% of trading in Nikkei225 options. Deutsche Bank Equities Global Market Structure South Korea Newsletter Issue 30

South Korean Market Structure Update Fig 1: Equities South Korean market monthly ADT (lit, auction & non-displayed order types) 12.00

2011 2012 2013 Total (USD$) %loss/gain 10.00 Monthly ADT (July 2013) USD$5.26bn 8.79% 8.00 Source: Thomson Reuters, 2013

6.00

Chi-X Global and SBI Japannext in the running for ATS platofrm (USD bn) Following details contained in Issue 29, there have been a number of 4.00 press articles relating to the potential alternate venue. Chi-X Global 2.00 and SBI Japannext (using NYSE technology) are both reported to be considering acting as the technology platform providers for any 0.00 upcoming ATS. Both firms are looking at the potential to work with on JanFeb Mar Apr May Jun Jul AugSep Oct NovDec shore brokers, with up to eight broker consortium members holding no Source: Thomson Reuters, 2013 more than 15% each of the new venue. Fig 2: Equities Daily Turnover per venue - July 2013

According to an FT article, Tal Cohen (CEO Chi-X Global) stated 7.00 “We are actively assessing the opportunity, but it’s still early days. Korea 6.00 Korea KOSDAQ is one of the large markets in Asia, and it is trying to open itself up. What 5.00 we want to do is work with the local firms to showcase what we can bring to the table.” 4.00

Chuck Chon, Co-chief Executive of SBI Japannext, said: (USD bn) 3.00 “We are actively engaged with the top eight brokers, and we have 2.00 approached them with our proposal to bring our successful formula 1.00 developed in Japan and to launch with consortium partners in Korea.” 0.00 However, high transaction taxes, the 5% cap on market share and the 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y KRW 20 billion won (US$18 billion) capital requirement pose challenges Source: Thomson Reuters, 2013 for an incomer. Nick Ronalds, Head of the Equities Committee of ASIFMA said Fig 3: Futures KFE KOSPI monthly ADT 60.00 “From the standpoint of an ATS operator deciding whether to set up in 2011 2012 2013 Korea, the [cap] would obviously affect your decision about whether it’s 50.00 feasible or reasonable [to set up in the market]”. 40.00

South Korea plans to impose tax on derivatives trading 30.00 (USD bn) The South Korean government is pushing ahead with plans to impose 20.00 a tax on derivatives trading next year. Per the revised tax bill being proposed by South Korea’s Ministry of Strategy and Finance next month, 10.00 a 0.001% tax will be applied to the turnover value per futures trade. Options will reportedly be subjected to a 0.01% levy. 0.00 JanFeb Mar Apr May Jun Jul AugSep Oct NovDec

This may further bring down the derivatives trading volumes in Korea Source: Bloomberg, 2013 which were already reported to be down ~70% in first half of 2013 compared to 2012. The Government expects the tax to generate KRW120bn ($107.9m), according to officials. Venue News Korea direct financing up 17% MOM, Corporate direct financing down 9% YOY KRX algo management plan for derivatives Corporate direct financing amount in Korean market during the first half of 2013 was $53,845m, down 9.3% ($5,507m) from $59,352m in the In an update provided on 12th July, the KRX has released a same period last year. ‘Comprehensive Management Plan for Algorithmic Trading in the KRX Derivatives Market’ in order to avoid negative market impacts generated Direct financing amount in June this year was $93,215m, up 17.2% by algorithmic trading errors and secure both effectiveness and safety ($1,37m) from $7,951m during the previous month. of the derivatives market with the comprehensive management plan designed to prevent such abnormalities. 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

An “algorithmic03-June 04-June trade”05-June 06-June has07-June 10-June been11-June defined12-June 13-June 14-June as17-June “the18-June 19-June use20-June of 21-June electronic24-June 25-June 26-June 27-June 28-June platformsSource: Thomson for Reuters, entering 2012 trading orders with an algorithm which executes South Korean Market Structure Monthly Newsletter 17

pre-programmed trading instructions whose variables may include Details of the surcharge for excessive orders are set out here: timing, price, or quantity of the order, or in many cases initiating the order without human intervention.” A summary table has been provided to the market in relation to the receipt and transmission of orders as below.

Guidance in also given on a number of topics including: — how to register an algorithmic trading account —the introduction of a cumulative order limit —the introduction of a kill switch —the obligation to set up an automated order cancellation system —an increase in the management level for risk exposure amount South Korean Market Structure Monthly Newsletter 18

The timeline for implementation of the regulations is

For the complete detail of the notice click here: http://eng.krx.co.kr/coreboard/BHPENG09004/view.jspx?bbsSeq=20017&secretYn=N

KONEX’s low turnover 22 firms listed on Konex (South Korea’s new venture driven stock market) experienced sluggish turnover as institutions refrained from selling their shares on the new bourse. Foreign investors made no investments either. Individuals accounted for ~60% of total trading volume of KRW 8.5Bn (USD 7.57Mn).

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure Australian Newsletter Issue 30

Australian Market Structure Update Fig 1: Equities Australian market monthly ADT (lit, auction & non-displayed order types) 6.00 Monthly ADT (July 2013) Total (AUD$) %loss/gain 2011 2012 2013 Total market ADT AUD$3.63bn 20.98% 5.00 Lit ADT AUD$3.31bn 21.64% 4.00

Dark ADT AUD$0.19bn 8.08% 3.00 (USD bn)

OTC ADT AUD$0.13bn 20.06% 2.00 Source: Thomson Reuters, 2013 Market integrity rules on dark liquidity and HFT 1.00

0.00 On the 12th of August, ASIC released the latest guidance on Jan Apr Mar Apr May Jun Jul AugSep Oct NovDec Consultation Paper 202 (Dark liquidity and high-frequency trading: Source: Thomson Reuters, 2013 Proposals). The new rules focus primarily on dark pool regulation and disclosure. See page 22 for table of topics considered. Fig 2: Equities Daily Turnover per venue - July 2013 Jul 25: All Individual 80.00 Equity Derivatives Expiration Normal ASIC to close disclosure loophole on share purchases 70.00 CentrePoint for executives 60.00 Crossing

ASIC and ASX are releasing a discussion paper in September to 50.00 ETF Special Trades address the purchasing of shares for executives by ASX listed Jul 18: All Equity Index Options 40.00 and Derivatives Expiration companies. $1.5 billion worth of share purchases for company (USD bn) Other 30.00 executives went unreported in 2012 due to the loophole, which Special Crossing 20.00 involves categorizing the share purchases as financing cash flow. Auction-Close

10.00 Auction-Open http://www.smh.com.au/business/companies-use-loopholes-to-buy-shares- Unknown 20130326-2gs91.html 0.00 Directed Reporting 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y OTC derivative reporting rules released Source: Thomson Reuters, 2013 On 11th of July, ASIC released final rules around OTC derivatives trade Fig 3: Equities Daily % Order Type - July 2013 % Lit % Dark % Real-Time Off-Exchange reporting obligations for financial institutions. Mandatory reporting will 120.00 be phased in over three stages, following a voluntary reporting period OTC beginning on the 1st of October 2013. 100.00

The new reporting regime covers financial institutions and 80.00 intermediaries, with end users not affected by the new rules. ASIC plans 60.00

to consult on the reporting obligations for end users later this year. % 40.00 http://www.asic.gov.au/asic/asic.nsf/byHeadline/13-171MR%20OTC%20 derivatives%20reform%20-%20ASIC%20implements%20reporting%20 20.00 regime?opendocument 0.00 3-July 1-July 2-July 4-July 5-July 6-July 7-July 8-July 9-July 13-Jul y 23-Jul y 30-Jul y 31-Jul y 14-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 20-Jul y 21-Jul y 22-Jul y 24-Jul y 25-Jul y ASIC Issues multiple infringement notices and fines 10-Jul y 11-Jul y 12-Jul y 26-Jul y 27-Jul y 28-Jul y 29-Jul y

There has been an uptick in the number of infringement notices and Source: Thomson Reuters, 2013 fines issued by ASIC to brokers recently, including the following fines Fig 4: Equities Spreads (bps) - July 2013 in the last month: 19 — Instinet Australia fined $130,000. The fine related to Instinet’s

automated order processing system failing to stop priority crossings S&P ASX with no change of beneficial ownership. 15 All Ords (AUD) — Euroz Securities Limited fined $35,000 for placing an order to sell 800,000 EVN at $0.013 vs the last price of $1.68, which resulted in 11 S&P ASX300 EVN being sold down 25% to $1.25 Spreads (bps) (AUD) — UBS Securities Australia fined $30,000 for entering an offer in QAU to sell 1,800 units at $0.165 vs. last price of $15.75, resulting in a 1% 7 price move down to $15.585 S&P ASX20 (AUD) — Credit Suisse Equities fined $95,000 for allowing an algorithm to 3 place an order to sell 1,616 HSTDA at $0.315, without taking into 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

account a 10 to 1 share consolidation that occurred the previous day. Source: Thomson Reuters, 2013 This resulted in a 48% price decrease from the adjusted last price. Australian Market Structure Monthly Newsletter 20

Venue Updates Fig 5: Equities Volatility - July 2013

24.00 S&P ASX All Ords (AUD) 22.00 ASX announces enhancements to ‘Sweep’ orders, updates for MIR S&P ASX300 (AUD) compliance 20.00 S&P ASX20 (AUD) On the 22nd of July, the ASX announced enhancements to ‘Limit Sweep’ 18.00 % orders. Sweep orders interact with flow posted in ASX Centerpoint before 16.00 trading in the ASX TradeMatch (the lit market). The behaviour of Sweep orders in the lit market will be identical to current TradeMatch limit 14.00 orders, which will allow the substitution of Sweep orders for normal Limit 12.00 orders. The changes will bring ASX functionality in-line with ChiX (ChiX 10.00 limit orders already automatically match with flow posted in ChiX Hidden Liquidity). It is likely that a large number of brokers will substitute Sweep 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Limit orders for Limit orders when the changes come into effect. Source: Thomson Reuters, 2013

Additional functionality will be introduced to allow ‘dual posting’ of Fig 6: Futures SFE-ASX SPI 200 monthly ADT liquidity in Tradematch and Centerpoint. Sweep orders flagged as 8.00 ‘dual posting’ will post on Tradematch, and also match with orders in 2011 2012 2013 Centerpoint at half a tick above their limit price. 7.00 The changes come into effect on November 25th. 6.00 5.00 There are additional technical changes being implemented on October 4.00 28th, as part of a mandatory release. (USD bn) 1. New fields will be included in ASX Trade messages including both 3.00 order and trade messages. 2.00 2. The settlement date for Special Markets 1.00 0.00 See table below. The full notice can be accessed here: JanFeb Mar Apr May Jun Jul AugSep Oct NovDec https://www.asxonline.com/intradoc-cgi/groups/trading_and_market_information/ Source: Bloomberg, 2013 documents/communications/asx_037637.pdf

Event Enhanced Test Environment Functional Test Environment ASX Trade Production Environment ASX Trade Central System release 26th July TBC* Installed for Mandatory release 26th July TBC* 28th Oct It is mandatory for all ASX Trade Open Interface applications to be recompiled to the latest version of the ASX Trade Open Interface Header file. The current ASX Trade Production API version will no tbe supported from 28th Oct 2013 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

New Open Interface header file can 26th July TBC* Source: Thomson Reuters, 2013 28th Oct be used with applications Regulatory Data Capture to comply 26th July TBC* 28th Oct with ASIC MIR Participants are not required by ASIC to provide this regulatory data to ASIC until 10th March 2014 Settlement Date enhancements to 26th July TBC* 28th Oct support Special Markets The new information fields will not be used or contain values until implementation of the new standard timetable for rights issues. This will not be before 2014 Content changes to ASX Trade August TBC* 28th Oct

Fields and defect fix 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y Source: Thomson Reuters, 2013 ASX Trade Central System Release TBC** TBC** 25th Nov Installed for Enhancement release Enhancements to Limit Sweep TBC** TBC** 25th Nov Orders

*Changes will be available in FTE 2 weeks prior to nominated go-live date **The PTE will be upgraded early Oct. Environment details Australian Market Structure Monthly Newsletter 21

Chi-x gains approval for market maker rules Order Change Status Following CP02/2013, the Chi-x market maker rules have received Market Must rest in the order book with regulatory approval and are planned to come into effect on 1st November Peg Order at least 1 tick price improvement 2013. Those who register as market markets will have to follow the below inside the best bid or offer or half obligations: tick where NBBO spread is 1 tick. Security Group Minimum Maximum Trading Obligation Mid-Point In circumstances where Order Value Spread: Price: Ratio Order participants set a half tick limit Maximum price on a Mid-Point order, the Spread order can only rest at the half (in tick size) tick when the half tick is the arithmetic mid-point of the Group one (Top $10,000.00 $0< $20: 4 65% NBBO. If the half tick limit price 50 by market $20 < $40: 5 is not the arithmetic mid-point, capitalisation) $40 < $50: 6 the order will be rounded (if a bid $50 < $60: 7 rounded down, if offer rounded $60 < $70: 8 up) to the nearest full tick. If the $70 < $80: 8 NBBO moves such that the half $80 < : 9 tick limit is again the arithmetic Group Two $7,500.00 $0 < $20: 4 65% mid-point of the NBBO the order (remainder of $20 < $30: 5 will revert to resting at the half ASX 200) $30 ≤ : on a tick. case by case basis (but ≥ 6) It is also expected that the MIR requirements will lead to additional fields Group Three $5,000.00 $0 < $20: 4 50% in orders, trade and execution reports including: (remainder) $20 ≤ : on a 1. Execution venue case by case basis (but ≥ 5) 2. Origin of order Chi-X is considering an appropriate fee regime given the benefits 3. Intermediary ID providing such liquidity to the market would bring. This will be separately 4. Wholesale indicator developed and implemented in consultation with ASIC. The short sell requirements imposed in the Corporations Act are subject to exemptions You can access the notice here: for market makers, if the affirmative obligations detailed above are http://www.chi-x.com.au/Portals/8/Notices/Mrkt%20Ops/Market%20Operations%20 monitored and enforced, participants may be able to apply for such relief Notice%200019-13.pdf from ASIC. The operational details are being discussed with ASIC, the rules will go ASX finalises code of practice for clearing and settlement live once they are confirmed. The ASX released the final Code of Practice for Clearing and Settlement For the consultation paper click here: of Cash Equities on the 18th July 2013. The code covers the ASX’s http://www.chi-x.com.au/Portals/8/Notices/Compliance/CP%202%202013.pdf obligation with regards to pricing and access to settlement services, and mandates the establishment of an advisory forum where users of ASX clearing and settlement services and other stakeholders can provide input Changes to Chi-X order types to the boards of ASX Clear and ASX Settlement. The code came into The following details have been released by Chi-X with regards to order effect on the 9th of August. types. http://www.asx.com.au/cs/documents/ASX_finalises_Code_of_Practice_and_ membership_of_Forum.pdf Order Change Status Hidden Discontinued Implemented ASX conducts “war games” Limit Order The ASX undertook “war games” last month to simulate a cyber-attack on exchange infrastructure. A research paper published by the World Peg Offset Discontinued Implemented Federation of Exchanges and the International Organisation of Securities Primary Must rest in the order book with Changes expected Commission found 53 per cent of exchanges - including the key global Peg Order at least 1 tick price improvement to be available as exchanges - suffered a cyber attack last year. inside the best bid or offer or half follows: tick where NBBO spread is 1 tick. — in PTE for client Sources testing from www.asic.gov.au Monday 19 August www.smh.com.au 2013; and www.chi-x.com.au — The change is www.asx.com.au expected to move into production in early September on a date to be confirmed. Australian Market Structure Monthly Newsletter 22

Market integrity rules on dark liquidity and HFT The following topics are considered Topic 10th Nov 2013 9th Feb2014 10th Feb 2014 9th May 2014 26th May 2014 Crossing system Operators must Disclosures on the operation of Identify trade transparency and publish information the facility information for disclosure on the crossing wholesale clients as system on a to whether it was a website. Will principal cross include product

Crossing system fair Tick sizes that treatment apply to exchange markets will also apply to crossing systems Clients must have the A common set of procedures must ability to opt out if desired be in place which do not unfairly discriminate between users Crossing system monitoring If suspicious activity is noticed in a crossing system, it must be reported to ASIC Activity most be From 10th May, monitoring waiver monitored, waiver in expires place until 10th May 2014 Crossing system controls Operators must notify ASIC Existing system of system issues as soon as and control practicable requirements for automated order processing will extend to crossing systems Enhanced conflict of Client orders must be dealt with Client confidential information interest obligations fairly and in due turn must be protected Order flow incentives Market participants will be prevented from receiving negative commissions HFT – Manipulative Market participants must consider trading circumstances whether the frequency of an order, of order the volume of products subject to each order and the extent to which orders are cancelled or amended in relation to whether there has been a false or misleading impression given Harmonisation of Market participants of ASX 24 manipulative trading rules must comply with manipulative trading rules (in line with rules for ASX and Chi-x)

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170 Deutsche Bank Equities Global Market Structure ASEAN Newsletter Issue 30

ASEAN Market Structure Update Fig 1: Equities Singapore market monthly ADT (lit, auction & non-displayed order types) 1.60 Total (USD$) %loss/gain 1.40 2011 2012 2013 Monthly ADT (July 2013) USD$0.74bn 29.34% 1.20 Source: Thomson Reuters, 2013 1.00 MAS sets up a cross border collateral arrangement with BoJ 0.80 (USD bn) The Monetary Authority of Singapore (“MAS”) and Bank of Japan 0.60 (“BoJ”) have set up a cross-border collateral arrangement to enhance 0.40 financial stability in Singapore. Under the agreement, eligible financial 0.20 institutions operating in Singapore may obtain Singapore dollars from 0.00 MAS by pledging Japanese government securities with MAS. JanFeb Mar Apr May Jun Jul AugSep Oct NovDec This widens the range of acceptable collateral in MAS’ liquidity Source: Thomson Reuters, 2013 facility, and permits greater flexibility in the liquidity management of Fig 2: Equities Daily % order type - July 2013 eligible financial institutions, including Japanese banks, operating in 120 Singapore. % Lit % Real-time on-exchange 100

MAS fines 22 financial institutions over money laundering 80

The MAS fined 22 financial institutions and restricted operations 60 at seven firms for failing to comply with rules to prevent money (USD bn) laundering and terrorism financing in the past three years. The 40 Monetary Authority of Singapore also issued 47 warnings and 20 reprimands and ordered “a few” financial firms to review their anti- money laundering framework. 0

“Like any international financial center, we recognize that Singapore is 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y vulnerable to being used as a conduit for illicit funds,” Lee said. “This Source: Thomson Reuters, 2013 is a clear message that Singapore neither wants nor will tolerate such Fig 3: Futures SGX MSCI Singapore monthly ADT illicit flows.” Lee Boon Ngiap, an assistant managing director at the 1.20 regulator, said. 2011 2012 2013

1.00 Philippines may not be able to join the ASEAN link by 2015 0.80 The Philippine Stock Exchange (“PSE”) has said that it may not be 0.60 able to join the planned integration of ASEAN exchanges two years (USD bn) from now as it needs more time to prepare the local markets and 0.40 infrastructure to be able to compete in an integrated environment.

Apart from the stock and bond markets, the local banking community 0.20 likewise is unprepared for regional integration, according to bankers and regulators. A number of regulatory and infrastructure upgrades 0 will be required before the integration can be achieved. JanFeb Mar Apr May Jun Jul AugSep Oct NovDec Source: Bloomberg, 2013 “Clearly if you are to ask what is logical for the stock exchange, we have to have as many products and that includes fixed income. That includes integrating the infrastructure--we have to have the Venue News depository, the risk management process. The integration of the fixed income products, as well as the platforms would be part of our strategic plan to have an integrated Philippine Stock Exchange.” PSE Trading at SGX rises in July president Sicat said. SGX has reported an increase in the trading activity in both securities and derivatives segments on its platform from a year ago. Major highlights below: — Total securities turnover was S$27.5 billion, up 2% year on year — Total futures and options volume increased 52% year-on-year to 8.8 million contracts.

Source: Thomson Reuters, 2012 ASEAN Market Structure Monthly Newsletter 24

— China A50 futures trading more than doubled to 1.7 million contracts SGX introduces new rules for listed companies year-on-year. SGX has introduced new rules related to holding of general meetings —  futures volume was up 44% year-on-year at 2.7 million in Singapore and Poll voting after consultations with the MAS and contracts. consideration of the public comments on the topics. The rules will be applicable to all companies/trusts listed on the Mainboard and Catalist. — MSCI Taiwan futures activity was up 30% to 1.9 million contracts from Highlights below: a year earlier. — Nifty futures trading increased 15% to 1.3 million contracts year-on- — Holding of General Meetings in Singapore to be effective 1st January year. 2014 — MSCI Indonesia Index Futures more than quadrupled to 32,737 — All companies to hold general meetings in Singapore to maximise contracts. shareholder participation and engagement. — Month-end open interest was up 21% year-on-year to 994,317 — Alternative arrangements like webcasts to be made in case of legal contracts. constraints to hold meetings in Singapore — Voting by Poll to be effective 1st August 2015 SGX reported a 43% year-on-year rise in its Net income to S$ 87.6mn on the back of record derivatives volumes and increase in stock volumes. For — Voting to be conducted by polls where shareholders are accorded the financial year ended 30th June, net profit was up 15% at S$ 335.9mn, rights proportionate to their shareholding and all votes should be while operating revenue rose 10% to S$ 715 mn. counted. — Shareholders who are unable to attend the meetings can cast their SGX launches long dated orders for securities votes through proxies to participate in the outcome of shareholders’ resolutions The SGX has launched long dated order types for securities which can be carried forward or retained for up to 30 days on the exchange unless — Disclosure of Voting Outcomes to be effective 1st August 2015 they are completed or cancelled. Investors will be able to specify the — Prompt disclosure of the voting decisions and outcomes should be number of days for which they want their orders to remain active on the made by all companies. exchange.

SET to expand the list of eligible stocks for Derivative Warrants SGX consults public on reducing standard board lot size (DW) The SGX is consulting the public on its proposal to reduce the standard board lot size of securities listed on SGX from 1,000 to 100 units, with a The Stock Exchange of Thailand (“SET”) has announced that effective 1st view to reducing it to 1 unit in the longer term. August, it will be adding an additional 29 stocks from the stocks ranked 51-100 in the SET100 index for derivative warrants (“DW”) and will The reduced board lot size is expected to benefit the public as individuals also expand DW with underlying indices covering SET Index series and will find it easier to invest in higher-priced shares, instead of limiting exchange-traded funds (“ETFs”). The underlying stocks to be added have themselves to lower-priced ones. Since many of the index component had an average during the past four quarters of at stocks and blue chips tend to be higher-priced, this will enable retail least THB10 billion (approx. US$323 million). The list of underlying stocks investors to more easily build balanced and diversified portfolios to grow will be revised quarterly and announced within five working days after the their savings. Institutional investors will also be better able to manage end of each quarter. their risk exposures through finer asset allocation of funds. The stocks to be added on August 1 are AAV, AMATA, AP, BCH, BECL, The proposed standard board lot size of 100 units will apply to ordinary BLAND, DCC, ESSO, HEMRAJ, ITD, LPN, MAJOR, MBK, MCOT, QH, shares, real estate investment trusts, business trusts, company warrants, ROJNA, SC, SIRI, SPALI, SSI, STA, STEC, STPI, THCOM, THRE, TISCO, structured warrants, extended settlement contracts and shares on TPIPL, TTA, and TVO. Including all of the underlying stocks in SET50 GlobalQuote. Existing board lot sizes of less than 100 units will remain index, SET’s DWs will have a new total of 79 underlying stocks. unchanged. Earlier on July 2nd, trading in DWs was improved by lengthening ticker Amendments are proposed to the Listing Rules, to cater for the reduction symbols to 12 letters to include the last trading date for that particular of the board lot size including: DW and enabling investors to easily indentify the allowed trading period of a given set of DWs. — Removal of Mainboard Listing Rules specifying the minimum board lot size for structured warrants, given the adoption of the standard board lot size of 100 for structured warrants SET raises trading targets for the year; Consolidates IT — Amendments to Mainboard and Catalist Listing Rules to require Infrastructure issuers to specify in the annual report, the number of shareholders The SET is raising its 2013 targets by 50% or more for market trading who hold less than 100 shares. volume and newly listed companies’ market capitalisation after Subject to regulatory approval and member readiness, SGX targets to witnessing a good run in the 1st half of the year and achieving all its half introduce these rules by the first quarter of 2014. The consultation is open yearly targets. till 6th September and can be accessed here – In 1H13, SET’s daily market trading turnover averaged Bt 61.4bn, up http://www.sgx.com/wps/wcm/connect/09393f0040c69dbe97def75b188 90% YoY and the highest in ASEAN. The FY13 target therefore has been ebef5/Consultation+Paper_Reduction+of+Board+Lot+Size_19Aug_Final. increased by 54% to Bt 49.5bn from Bt 32bn. pdf?MOD=AJPERES The target for newly listed companies’ market capitalisation is raised by http://www.sgx.com/wps/wcm/connect/sgx_en/Misc/regulations/PC/Consultation+Pap er+on+Reduction+in+Board+Lot+Size 50% to Bt 180bn from Bt 120bn. the targeted number of traded futures contracts is revised up to 66,000 per day from 50,000. SET has implemented Cisco’s Data Center architecture to increase operational flexibility, improve its business operations and streamline its online trading platform. ASEAN Market Structure Monthly Newsletter 25

Bursa Malaysia liberalises regulated short selling; KLCI records “24 companies have conducted initial public offerings this year. That has another all-time high brought the total number of listed companies to 483, with a combined market value of Rp 4,602 trillion ($461 bn). The IDX is encouraging the Bursa Malaysia has announced a larger pool of securities eligible for Indonesian Chamber of Commerce and Industry (Kadin), the Indonesian Short Selling and Stock Borrowing and Lending segment in a bid to Young Entrepreneurs Association (Hipmi) and the Indonesian Employers achieve the “Developed” market status. The list of stocks eligible for Association (Apindo) to persuade more business owners to list their securities borrowing and lending (SBL) has been increased to 171 from companies” - Hoesen, a director at IDX, said. 100 previously with the removal of the Securities Commission’s (SC) 100-stock cap. short selling activity reached a record RM 293mn level in June compared to almost nil a year ago indicating strong institutional Myanmar to launch stock exchange investor interest on the trading strategy on local bourse. Currently only Mayanmar has introduced a “Security Exchange Law” to the lower house institutional investors are allowed to participate in the regulated short of parliament and is expecting to launch its own stock exchange shortly selling and SLB segments. once the bill is approved. The Central Bank of Myanmar is cooperating “The existence of short selling and securities lending were among the with the Daiwa Institute of Research Group and Japan’s Tokyo Stock criteria set by index provider FTSE Group for a “Developed” stock market. Exchange to establish the local bourse. A relevant committee has also The list will be reviewed on a semi-annual basis in June and December, been formed in order to ensure a smooth launch for the exchange. resembling the process for the FTSE Bursa Malaysia KL Composite Index, and it may exceed 171 counters if enough stocks meet the criteria.” Bursa acting director of securities market Ong Li Lee said. Personnel News The FTSE Bursa Malaysia KLCI (FBM KLCI) recorded another all-time high after closing on 1797.74 points on 20th July. The index had also reached Senior management changes at MAS an intra-day high of 1800.26. The MAS has made a number of changes at the senior management level in an attempt to strengthen its leadership bench. All the changes will Bursa Malaysia 2Q net profit soars 45%, posts best 1H results be effective from 1st September 2013. “These changes are intended to since 2007 strengthen our leadership bench, and to bring fresh perspectives to our Bursa Malaysia announced a 45% rise in its year-on-year 2Q net profits core areas of work.” Managing Director Ravi Menon said. to RM 54.82mn on the back of higher trading value of securities traded. Below are the major changes It’s the highest quarterly profit for the bourse since the rally in 2007. Turnover jumped 23% to RM130.35mil from RM105.38mil a year ago, — Ms Teo Swee Lian, now the deputy managing director (financial while earnings per share stood at 10.3 sen for the quarter against 7.1 sen supervision), will step down from her current position to become previously. special adviser in the Managing Director’s Office, where she will help MAS play a more active role in international regulatory work. For the period of 1H 2013, Bursa’s net profit surged 19% to RM 93.02mn against RM 78.35mn last year. Revenue gained 11% to RM 240.79mn — Ms Teo will be succeeded by Mr Ong Chong Tee, who will oversee the versus RM 215.24mn, while earnings per share was 17.5 sen against 14.7 Banking & Insurance, Capital Markets, and Policy, Risk & Surveillance sen earlier. groups in his new appointment. Mr Ong will relinquish his current roles as deputy managing director (monetary policy & investment) and “Bursa Malaysia’s solid performance in 1H13 is due to the stronger deputy managing director (financial development). performance from our three markets (Securities, Derivatives and Islamic). All three markets recorded high double digit growth in respective traded — Jacqueline Loh will succeed Ong as head of monetary policy and volumes as a result of increased foreign and retail participation. This investment, and development and international. performance is a reflection of the local and global interest and confidence — Andrew Khoo will lead corporate development. in Malaysia’s strong fundamentals. Bursa Malaysia has not seen such momentum in the past six years.” Dato Tajuddin Atan, CEO, Bursa — Edward Robinson, an assistant managing director of economic policy, Malaysia said. was named chief economist in addition to his current position. — Foo-Yap Siew Hong will become assistant managing director, special PSE offers incentives for ETF market makers projects, in the Managing Director’s Office In a bid to promote the introduction of the new asset class in ETFs in the local markets, the PSE has announced a waiver of transaction fees (0.0005% of transaction value normally) for market participants acting as Sources www.en.acnnewswire.com “Market Makers” for the product. www.ft.com www.channelnewsasia.com Under the SEC-approved ETF rules, at least one of the designated www.biz.thestar.com.my www.sgx.com authorized participants of the ETF should act as a market maker, whose www.bworldonline.com www.mas.org main role is to ensure sufficient liquidity in the market. www.nationmultimedia.com www.reuters.com www.philstar.com “Given that market making is a novel practice in our market, we want www.4-traders.com to incentivize participants at this point to help encourage more traders www.waterstechnology.com www.bangkokpost.com to consider being a market maker for ETFs. This is consistent with www.btimes.com www.todayonline.com practices of exchanges in other countries to help promote liquidity in their www.finextra.com markets,” PSE president Hans Sicat said. www.thestar.com www.gowealthy.com www.online.wsj.com www.ibtimes.com www.thejakartagloble.com IDX revises its new listings forecast to 40 The Indonesia Stock Exchange (“IDX”) has increased its forecast for new public offers in the current year to 40 (up from 30 earlier) amid a great rush by local companies to tap the local markets to raise funds. The JCI index had hit record highs in May before the US fed announced plans to ease its asset purchase program. Deutsche Bank Equities Global Market Structure APAC Quant Analysis Factsheet - July 2013

Below is a selection of quantitative metrics, which provides additional analysis of the markets and liquidity during July 2013. For further information, please contact:

Global Market Structure: Quantitative Analysis: email: [email protected] email: [email protected] tel: +44 207 547 4390 tel: +44 207 545 3129

Liquidity 33.0 The chart below shows the daily index primary spreads on APAC indices during July 2013: 28.0 33.0 23.0 MSCI Asia Pacic Ex JP 28.0 S&P/ASX 200 Index 18.0 23.0 HangMSCI SengAsia PacicComposite Ex JP Index 13.0 KoreaS&P/ASX SE Kospi200 Index 200 Index

Spread (bps) 18.0 8.0 TaiwanHang Seng TAIEX Composite Index Index 13.0 3.0 FTSEKorea Straits SE Kospi Time 200 Index Index Spread (bps) NSE S&P CNX Nifty 8.0 Taiwan TAIEX Index 3.0 FTSE Straits Time Index

01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y NSE S&P CNX Nifty 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Sources:Deutsche Bank AG estimates and calculations

Historical Volatility

The chart below shows primary volatility of APAC indices during July 2013:

26.0

24.0

22.026.0 MSCI Asia Pacic Ex JP 20.024.0 S&P/ASX 200 Index

18.022.0 HangMSCI SengAsia PacicComposite Ex JP Index 16.020.0 KoreaS&P/ASX SE Kospi200 Inde 200x Index Volatility Taiwan TAIEX Index 14.018.0 Hang Seng Composite Index FTSE Straits Time Index 12.016.0 Korea SE Kospi 200 Index Volatility NSE S&P CNX Nifty Taiwan TAIEX Index 10.014.0 FTSE Straits Time Index 12.0

01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y NSE S&P CNX Nifty 10.0

Sources:Deutsche Bank AG estimates and calculations 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

65.0% 60.0% 55.0% MSCI Asia Pacic Ex JP 65.0% 50.0% 60.0% S&P/ASX 200 Index 45.0% 55.0% HangMSCI SengAsia PacicComposite Ex JP Index 40.0% 50.0% KoreaS&P/ASX SE Kospi200 Inde 200x Index 35.0% 45.0% Taiwan TAIEX Index 30.0% Hang Seng Composite Index 40.0% FTSEKorea Straits SE Kospi Time 200 Index Index Intra-Index Correlatio n 25.0% 35.0% NSE S&P CNX Nifty 20.0% Taiwan TAIEX Index 30.0% FTSE Straits Time Index

Intra-Index Correlatio n 25.0% 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y NSE S&P CNX Nifty 20.0% 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y 33.0

28.0

23.0 MSCI Asia Pacic Ex JP S&P/ASX 200 Index 18.0 Hang Seng Composite Index 13.0 Korea SE Kospi 200 Index Spread (bps) 8.0 Taiwan TAIEX Index 3.0 FTSE Straits Time Index NSE S&P CNX Nifty 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

26.0

24.0

22.0 MSCI Asia Pacic Ex JP 20.0 S&P/ASX 200 Index

18.0 Hang Seng Composite Index

16.0 Korea SE Kospi 200 Index Volatility Taiwan TAIEX Index 14.0 FTSE Straits Time Index 12.0 NSE S&P CNX Nifty Quant10.0 Factsheet Monthly Newsletter 27 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Intra-Index Correlation

The chart below shows the correlation of movement within each index, calculated using the index and index constituents volatilities and weights:

65.0% 60.0% 55.0% MSCI Asia Pacic Ex JP 50.0% S&P/ASX 200 Index 45.0% Hang Seng Composite Index 40.0% Korea SE Kospi 200 Index 35.0% Taiwan TAIEX Index 30.0% FTSE Straits Time Index

Intra-Index Correlatio n 25.0% NSE S&P CNX Nifty 20.0% 01-Jul y 02-Jul y 03-Jul y 04-Jul y 05-Jul y 08-Jul y 09-Jul y 10-Jul y 11-Jul y 12-Jul y 15-Jul y 16-Jul y 17-Jul y 18-Jul y 19-Jul y 22-Jul y 23-Jul y 24-Jul y 25-Jul y 26-Jul y 29-Jul y 30-Jul y 31-Jul y

Sources:Deutsche Bank AG estimates and calculations Sector Correlation Matrix

The matrix below shows the % correlation of movement between two sectors during the previous month:

80-100% 60-80% 25-60% <25% 1M Historical Correlations Bev. Res. Real Mat. Leis. Pers. Pers. Serv. Parts Tech. Basic Retail Banks Estate Media Goods Auto & & Serv. Food & Utilities Travel & Travel Ind. Gds Const. & Financial Chemical Telecoms Oil & Gas Auto. & Parts 100.0% 81.9% 72.0% 84.3% 81.1% 77.3% 81.4% 83.9% 69.3% 81.8% 86.2% 78.2% 76.5% 81.0% 82.0% 78.5% 77.8% Banks 81.9% ##### 91.7% 79.1% 90.9% 91.6% 87.8% 90.0% 76.1% 90.2% 91.1% 93.3% 89.1% 87.4% 86.4% 87.6% 90.2% Basic Res. 72.0% 91.7% ##### 76.5% 88.0% 89.9% 80.6% 80.8% 75.2% 83.5% 84.6% 89.1% 76.4% 75.8% 77.2% 83.7% 76.0% Chemicals 84.3% 79.1% 76.5% ##### 82.9% 79.3% 82.7% 82.6% 70.6% 82.1% 83.3% 80.3% 78.6% 82.8% 86.6% 67.4% 73.0% Constr. & Mat. 81.1% 90.9% 88.0% 82.9% ##### 91.3% 87.7% 86.3% 72.6% 90.3% 93.9% 91.5% 86.3% 86.3% 84.6% 82.6% 87.3%

Financial Serv. 77.3% 91.6% 89.9% 79.3% 91.3%# #### 83.1% 83.0% 82.9% 88.5% 90.1% 88.5% 80.3% 83.5% 83.3% 83.7% 87.8% Food & Bev. 81.4% 87.8% 80.6% 82.7% 87.7% 83.1% ##### 90.5% 74.6% 84.0% 89.9% 85.9% 89.2% 88.6% 82.2% 82.1% 87.2% Ind. Gds & Serv. 83.9% 90.0% 80.8% 82.6% 86.3% 83.0% 90.5% ##### 80.1% 86.0% 87.7% 89.2% 91.2% 88.1% 82.1% 84.7% 86.2% Media 69.3% 76.1% 75.2% 70.6% 72.6% 82.9% 74.6% 80.1%# #### 79.1% 79.0% 79.1% 67.5% 78.7% 72.9% 77.5% 72.8% Oil & Gas 81.8% 90.2% 83.5% 82.1% 90.3% 88.5% 84.0% 86.0% 79.1% ##### 93.9% 89.2% 84.5% 84.4% 89.9% 81.0% 88.8% Pers. Goods 86.2% 91.1% 84.6% 83.3% 93.9% 90.1% 89.9% 87.7% 79.0% 93.9% ##### 89.3% 88.4% 88.2% 88.1% 87.5% 90.0%

Real Estate 78.2% 93.3% 89.1% 80.3% 91.5% 88.5% 85.9% 89.2% 79.1% 89.2% 89.3% ##### 86.6% 82.3% 88.0% 83.5% 87.9%

Retail 76.5% 89.1% 76.4% 78.6% 86.3% 80.3% 89.2% 91.2% 67.5% 84.5% 88.4% 86.6% ##### 85.6% 79.8% 78.3% 89.1%

Technology 81.0% 87.4% 75.8% 82.8% 86.3% 83.5% 88.6% 88.1% 78.7% 84.4% 88.2% 82.3% 85.6% ##### 83.8% 80.7% 84.0%

Telecoms 82.0% 86.4% 77.2% 86.6% 84.6% 83.3% 82.2% 82.1% 72.9% 89.9% 88.1% 88.0% 79.8% 83.8% ##### 77.4% 83.2%

Travel & Leis. 78.5% 87.6% 83.7% 67.4% 82.6% 83.7% 82.1% 84.7% 77.5% 81.0% 87.5% 83.5% 78.3% 80.7% 77.4% ##### 80.8%

Utilities 77.8% 90.2% 76.0% 73.0% 87.3% 87.8% 87.2% 86.2% 72.8% 88.8% 90.0% 87.9% 89.1% 84.0% 83.2% 80.8% #####

Sources:Deutsche Bank AG estimates and calculations 28

Disclaimer

This document is intended for discussion purposes only and does not create any legally binding obligations on the part of Deutsche Bank AG and/or its affiliates (“DB”). Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. When making an investment decision, you should rely solely on any specific final documentation relating to a transaction and not the summary contained herein. DB is not acting as your legal, financial, tax or accounting adviser or in any other fiduciary capacity with respect to any proposed transaction mentioned herein. This document does not constitute the provision of investment advice and is not intended to do so, but is intended to be general information. Any product(s) or proposed transaction(s) mentioned herein may not be appropriate for all investors and before entering into any transaction you should take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of the transaction in the light of your own objectives, needs and circumstances, including the possible risks and benefits of entering into such transaction. For general information regarding the nature and risks of the proposed transaction and types of financial instruments please go to www.globalmarkets.db.com/riskdisclosures. You should also consider seeking advice from your own advisers in making any assessment on the basis of this document. If you decide to enter into a transaction with DB, you do so in reliance on your own judgment. The information contained in this document is based on material we believe to be reliable; however, we do not represent that it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance does not guarantee or predict future results. This material was prepared by a Sales or Trading function within DB, and was not produced, reviewed or edited by the Research Department. Any opinions expressed herein may differ from the opinions expressed by other DB departments including the Research Department. Sales and Trading functions are subject to additional potential conflicts of interest which the Research Department does not face. DB may engage in transactions in a manner inconsistent with the views discussed herein. DB trades or may trade as principal in the instruments (or related derivatives), and may have proprietary positions in the instruments (or related derivatives) discussed herein. DB may make a market in the instruments (or related derivatives) discussed herein. Sales and Trading personnel are compensated in part based on the volume of transactions effected by them. DB seeks to transact business on an arm’s length basis with sophisticated investors capable of independently evaluating the merits and risks of each transaction, with investors who make their own decision regarding those transactions.

The distribution of this document and availability of these products and services in certain jurisdictions may be restricted by law. You may not distribute this document, in whole or in part, without our express written permission. DB SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF. DB is authorized under German Banking Law (competent authority: BaFin - Federal Financial Supervising Authority) and regulated by the Financial Services Authority for the conduct of UK business. In the US this document is approved and or distributed by Deutsche Bank Securities Inc., a member of the NYSE, FINRA, NFA and SIPC.

In Hong Kong: This document is intended for Professional Investors as defined by the SFO. Deutsche Securities Asia Limited – Hong Kong is a participant of the Stock Exchange of Hong Kong and is licensed as a licensed corporation with the Securities and Futures Commission. DBAG Hong Kong Branch is regulated by the Hong Kong Monetary Authority.

In US: In accordance with US regulations, please contact your local DB US registered broker dealer, Deutsche Bank Securities Inc., for any questions or discussion of potential transactions.

In Taiwan: This document is distributed in Taiwan by Deutsche Securities Asia Limited, Taipei Branch which is regulated by Financial Supervisory Commission, Executive Yuan. This document is intended for ‘Professional Investors’ as defined by securities regulations and is not for public dissemination’

IN AUSTRALIA: Deutsche Bank holds an Australian financial services licence (AFSL 238153).

In MALAYSIA: This document is distributed in Malaysia by Deutsche Bank (Malaysia) Berhad.

Contact Email: [email protected] Tel: +852 2203 5710 +44 207 547 5552 +1 212 250 4170