what’s next? 38August 2015ABN AMRO Clearing Newsletter for clients

2 What’s Next 38 - August 2015

3 Intro

4 British Standards Institute awards ISO Certificate

6 Electronic Liquidity Providers on the move

8 Bitcoin Block Chain

9 NASDAQ Energy Futures Trading

10 CME Group’s initiatives in Offshore/Onshore Chinese Renminbi

13 SGX FTSE China A50 Index Futures Gains Traction as Hedging Tool

16 Market Infrastructure update

20 US regulatory updates

23 Event calender

content

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Dear Clients,

By now, a number of you are either enjoying or just returning from a well-deserved rest

following an encouraging and busy first half of 2015. Here at ABN AMRO Clearing, we

have seen the strong Q4 performance of 2014 roll into 2015, which we hope has created

opportunities for all of our clients.

Regulatory changes continue to require investments –

from you as well as from us. We have started our

preparations for MiFID II, which enters into force in

January 2017. We will work with you in the coming period

to assist you where we can with your preparations, and to

present our common views to regulators and other

institutions.

This edition of What’s Next? contains articles on

technological and product developments including the

Bitcoin Block Chain, NFX and CME FX. We also bring you

news on the latest market developments in China and

Europe.

I look forward to working with you to make the second

half of 2015 as successful as possible!

Robbert Booij

Managing Director, ABN AMRO Clearing UK &

ABN AMRO UK Country Executive

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British Standards Institute awards ISO Certificate for Business Continuity Management

to ABN AMRO Clearing in London

The London Office of ABN AMRO Clearing (AAC)

is the IT hub for Europe. Which is why it is of the

utmost importance to have a level of resilience

that goes beyond the standard requirements.

The ISO certificate is independent evidence that

AAC’s business continuity management system is

of best-practice levels.

What does the ISO certificate provide our clients?

Victoria Leigh explains why AAC chose to apply for ISO

certification for its business continuity management:

“ISO certification provides our clients with independent

assurance that AAC has the plans, processes and

procedures in place to manage incidents well. It assures

clients that a thorough training programme is in place and

that rigorous resilience tests and exercises are performed

on a regular basis. It also tells clients that AAC is

continuously looking for improvements and that senior

management is heavily involved in the business continuity

management system. Best of all, business continuity

management involves everyone and all staff have been

instrumental in achieving this success.”

Victoria LeighOperational Risk Control & Business Continuity Officer

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Why did AAC go for ISO certification?Victoria: “There were a number of reasons for us to

embark on this journey.

1. Assurance for clients The ISO certificate provides clear assurance to clients that

are required to perform due diligence on their value-chain

partners and suppliers.

2. Changes in financial servicesThe financial world has changed since 2007. As a result,

clients, regulators and other stakeholders expect and

demand that financial services firms are able to continue

business under any circumstances. The ISO certificate

provides independently audited proof that the AAC London

office has the competences, plans and procedures to

manage any unforeseen event. It also shows that this has

been embedded within the organisation, together with a

process of continuous improvement and governance.

3. Staff collaborationWorking together to achieve this milestone has been, and

still is, a very good motivator for our London staff to

continue fulfilling their roles in the business continuity

management system.”

Is AAC planning to roll this out to other countries?

Following the positive responses, we are now looking at a

further rollout, based on the maturity levels of the different

offices.

For any questions about ISO certification, please contact:

victoria.leigh@uk.abnamroclearing.com

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Electronic Liquidity Providers on the move

A maturing business, now gaining ‘investment grade’ status

Buy-side investors have had little visibility on the business

model of Principal Trading Groups which are in essence

technology-enabled liquidity providers trading their own

capital. There is a grudge against ‘High-Frequency Trading’

firms that is fuelled by publications making allegations of

unfair practices in the industry. This perception should shift

as two leading global liquidity providers, Virtu Financial

LLC and Flow Traders NV have reached the ‘listed

company’ status. Virtu and Flow opened and showed their

robust operating models for investors to see that they are

professional and legitimate businesses which fulfil a

valuable and crucial role in today’s electronic market place.

Both firms are strong believers and outspoken supporters

of a fair and level playing field. It shows that their internal

organisation has grown strong enough to broaden their

capital base. This convinced investors of their capacity to

deliver an attractive return on investment in a well-

managed operational environment. It illustrates this

industry has grown to the next maturity level,

demonstrating high corporate governance standards as

well as the requisite high quality of internal controls.

The Investment Banker’s viewFor buy-side investors, successful Electronic Liquidity

Providers (ELPs) operating on a global scale offer an

attractive investment case. The technology-enabled

business model allows for revenue growth at marginal

costs. The global scale means that they are well

positioned to capitalise on the anticipated secular growth

in electronic trading. In addition, ELPs tend to benefit from

increased volatility resulting in wider spreads and

increases in market volumes, which adds further upside

potential for investors.

ELPs are positioned as an investment opportunity that

combines potential earnings growth with attractive

dividend levels. They deliver a track record of strong risk

control, high operating margins and low capital intensity.

At the time of Virtu’s IPO, the Financial Times Lex column

stated: “It may be that one high-frequency trader is not

too much but rather too few.” With the listing of Flow

Traders, a ‘FinTech’ subsector is emerging and investors

seem keen to see more liquidity providers apply for a

listing on a stock exchange. ABN AMRO Bank was the

only Dutch bank involved in Flow Traders’ IPO. This was

the second market-infrastructure IPO that the team

executed since 2014, having been a lead advisor on the

Euronext IPO.

The view of the issuersGlobally scalable businessELPs traditionally started as a partnership. The partners’

personal involvement was a guarantee for not taking

ill-tempered risks. As their own wealth was at stake, they

had a more risk-averse attitude than most outsiders would

imagine. Through the introduction of technology this

business developed into a play for scale. The winning

strategies could not only be deployed on the markets they

were initially constructed for, they also appeared suitable

for different asset classes on multiple markets. ELPs

leveraged their massive investments in IT-infrastructure

and communication technology by rapidly expanding their

product and geographical reach.

Why go public?ELPs have matured far beyond the ‘3-men-and-a-

computer-in-a-garage’-image they once had. They are now

willing to share their operating model.

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The Flow Traders’ IPO documentation is very explicit about

the question: why go public?: “We believe that the Offering

and the listing of the Shares on Euronext Amsterdam will

provide us with increased visibility of our business, our

industry and ETPs in general. We expect this will raise our

profile with institutional counterparties, regulators and

talent. In addition, the Offering and the listing of the Shares

on Euronext Amsterdam will enable us to accelerate our

organic growth and further market penetration. We also

believe that the Offering will enhance the Company’s ability

to access the capital markets for funding and it will create

liquidity for existing Shareholders.”

Dennis Dijkstra, Flow Traders’ co-CEO comments:

“Our company was founded in 2004 in Amsterdam and

has since grown into a global fin-tech company with over

250 employees. We feel that the listing fits our profile and

will support our growth strategy by further enhancing the

visibility of our business and our reputation among

institutional counterparties.” Sjoerd Rietberg, co-CEO of

Flow Traders adds: “The strong demand we have seen

from investors, their high level of recognition of our

innovative business model and track record and the

support for our growth strategy confirm our confidence in

a bright future as a listed company.”

“The noise in the industry created unique challenges and

opportunities for Virtu. Under the leadership of our CEO,

Doug Cifu, we realised that we could help institutional

investors better understand our business if we were fully

open and transparent. Since early 2014, we’ve had dozens

of buy-side and sell-side guests visit our offices and

trading floors,” says Andrew Smith of Virtu Financial, Inc..

“The unprecedented opening of our doors and our books,

helped educate investors which quelled most of the

hysteria surrounding Virtu. The shift in the buy-side’s

opinion of Virtu was most evident in our IPO order book.

Post-IPO, our door remains open and we continue to host

on-site visitors. Visitors that seek a better understanding

of Virtu’s role as a global, passive liquidity provider and of

how we partner with the sell-side to provide them with

competitive pricing that they pass on to their clients.”

ABN AMRO Clearing: a catalyst for growth Efficient marketsWe strongly believe in a market structure based on healthy

competition between its participants. Market makers,

including ELPs, are a crucial success factor in providing

liquidity on many markets across the world. They enable

the investment community to efficiently hedge exposure

or transfer risk and provide continuous liquidity and depth

to the order book. Investors often need to enter or exit

positions quickly, especially in volatile markets or when

special events occur. As formal market makers, they are

required to make prices in the open order book and are

monitored against their contractual obligations

Commitment: we keep on investing!ABN AMRO Clearing is proud to fulfil an important role in

the fast maturing ‘FinTech’-value chain, acting as a global

provider of high profile Clearing, Settlement, Financing

and Securities Lending services. Active partnerships with

our Clients have given some of them the necessary

support to develop into global financial powerhouses.

Our clients value ▶ our strong commitment to the industry, with

knowledgeable and highly motivated staff

▶ our in-house developed risk tool (Correlation Haircut

model) and

▶ our continuous investment in new market connections

and interesting asset classes (equities, options, futures,

commodities, energy, FX, OTC-products, …).

▶ The management of ABN AMRO Clearing and all staff

are strongly committed to making our clients globally

competitive.

Click on the logo to download prospectus

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Distributed ledgersand blockchain

Distributed ledgers are unique in their method of

executing a transaction. Classic centralized database

systems mutate records; this can be done by anyone that

has access to that system, which can result in

compromised data. Distributed ledgers on the contrary

require transactions to be digitally signed with a private

key. All computer nodes independently validate the

authenticity of the signature and the existence of value

and only record valid transactions in the ledger. So the

distributed ledger can be seen as a shared and replicated

database that runs on many computers simultaneously.

The best know implementation so far is the Bitcoin

blockchain. Bitcoin uses cryptographic keys to secure the

payments, hence it is called a crypto currency. It also uses

the blockchain technology and shows that it is possible

to securely transfer value from A to B without an

intermediary and without being able to spend the same

digital value twice.

The disintermediation part is what makes blockchain

potentially disruptive for financial services. For example FX

transactions or remittances can be done directly between

individuals without the currently third parties like

correspondent banks. It might also reshape the securities

industry which has been designed around central

institutions like exchanges, CCPs and CSDs.

Running the existing securities market on a network that

is hosted by volunteers around the globe with no

accountability, as is the case with Bitcoin, is probably not

the future. Using distributed ledger in a private network

between financial institutions that trust each other is

something that can be imagined. Several fintech

companies aim at providing such concepts and financial

institutions have started looking at this, while at the same

time tech behemoths like IBM invest in the technology.

ABN AMRO started a pilot where a distributed ledger is

used to facilitate trade finance. This pilot that is joined by

RABO and ING will also use another interesting blockchain

feature. Small computer scripts that exist on the ledger

take care of signing and validation of the signature. The

functionality of these scripts can be extended so that

additional prerequisites such as a second or third signature

can be required to execute a transaction. These extended

scripts are called smart contracts.

These smart contracts can be applied in derivatives

contracts, for example by automatically consulting the

reference price and determining the settlement price.

Given the large potential of this technology, ABN AMRO

Clearing actively engaged in this together with the

Innovation Centre of ABN AMRO to define use cases and

experiments in clearing and settlement.

Distributed ledgers, also known as blockchains, are decentralized platforms that can store and

transact all kinds of value electronically in such a way that all parties can verify all transactions.

The value that is stored can represent virtual or fiat currency, stocks or commodity goods.

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NASDAQ Energy Futures Trading

NFX trades Henry Hub, Brent, WTI, US Power and Fuel

oils. This is in direct competition with NYMEX and ICE,

and NFX has taken an aggressive approach, offering zero

exchange fees for the first nine months in an effort to

capture the attention of market participants. NFX will

continue to offer competitive exchange fees beyond this

period. Initial reaction to NFX’s offering from our PTG

clients has been positive. For many of them, familiarity

with the NASDAQ platform made access a relatively

efficient process. Additionally, the NFX products, as ‘look-

alikes’, are highly correlated to NYMEX and ICE products,

thus producing risk and financing efficiencies for clients.

The NFX team has sought input from all potential

exchange participants during the pre-launch phase.

‘The Chicago NFX team has been a driving force to

improve the NFX risk management tools and set-up,’

commented Wilco Bakker, AACC Risk Manager,

who worked closely with the NFX team.

Find more details of NFX products and services,

as well as daily volume reports here.

Please contact your AAC Relationship Manager for

particulars on getting access to NFX.

ABN AMRO Clearing Chicago, LLC is a member of FINRA,

SIPC and NFA.

This communication is intended as a solicitation in the US.

Trading for the Nasdaq Futures, Inc. (NFX) energy markets commenced on 24 July. NFX offers cash-

settled futures and options that are benchmarked against CME Group-NYMEX and Intercontinental

Exchange products. ABN AMRO Clearing Chicago LLC (AACC) is a General Clearing Member of

NFX, clearing NFX via the Options Clearing Corporation (OCC).

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People’s Republic of ChinaIn order to align with our clients interest in China, ABN AMRO Clearing (AAC) is investigating whether it can offer its services in

China. In order to investigate possible access points into the market, various visits to exchanges, government departments,

legal firms and consultants in the People’s Republic of China (PRC) have taken place.

As you will be aware, the recent market turmoil has seen the regulatory landscape in China change on almost a daily basis

with the information available on those changes murky at best. As a result we are still very much in an investigatory stage, but

more information and news will follow.

We are however happy to bring you some updates from a number of our affiliated exchanges as follows.

Pauliene Schouten - Business Development Manager APAC

pauliene.schouten@sg.abnamroclearing.com

David West - Managing Director, ABN AMRO Clearing HK Ltd

david.west@hk.abnamroclearing.com

CME Group’s initiatives Chinese Renminbi

Previously, Chinese renminbi has been grossly underused

as a medium for international trade relative to the

significance of the Chinese economy. The Chinese

economy has grown rapidly in recent years with 2014 GDP

at 63.6 trillion renminbi ($10.3 trillion) and second only to

U.S. 2014 GDP at $17.4 trillion1. The People’s Republic of

China (PRC) is the world’s largest exporter.

Though GDP-growth concerns remain, RMB has made

significant gains by becoming the fifth most used

international trade payment currency in November 2014,

overtaking both the Canadian dollar and Australian dollar.

RMB is now the most traded currency in Asia as payments

exchanged with China and Hong Kong within Asia Pacific

surged by 327% between April 2012 and April 2015.

In recent years we have experienced a perfect storm of increasing volatility in certain regions and

markets, new and evolving regulations impacting financial market activity, and constant pressure to

enhance working capital efficiencies. This has created a much more complex environment that impacts

all FX market participants. In this ever changing landscape, Chinese renminbi (RMB) trading is no

exception. It is perhaps even more complex than other FX markets due to the offshore and onshore

nature of trading practices and restrictions.

RMB still has a long way to go to catch up with USD and

EUR. The latter account for 45.14% and 27.36% of

transactions respectively, compared to 2.07% for RMB.2

Offshore and onshore corporate entities Offshore FX market participants are, however, restricted

from participating in the onshore renminbi (CNY) market with

some exceptions. Specifically, Qualified Foreign Institutional

Investors (QFIIs) are granted quotas to participate in

specified onshore trading and investment activities.

Certain corporate entities are allowed to participate in

foreign direct investment (FDI) in PRC.

1) National Bureau of Statistics of China and U.S. Department of Commerce, Bureau of Economic Analysis 2) SWIFT’s RMB Tracker, 27 May 2015

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100.000

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Growth of SGX FTSE China A50 Index Futures

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Offshore corporate entities are permitted to transact in

CNY if the FX exchange is part of a cross-border trade

settlement process. By the same token, onshore (or PRC

domiciled) entities are generally constrained from

participating in the offshore renminbi (CNH) marketplace.

PRC restrictions to foreign market participants has helped

fuel the growth of the offshore CNH market to the extent

that CNH spot, swaps, forwards, and options market

liquidity has improved significantly. Some OTC-estimates

around CNH assess average daily trading volume (ADV)

at nearly $30bn+ combined. BIS Triennial Central Bank

Survey of FX turnover puts RMB ADV at $120bn but does

not break out CNH from onshore RMB.3

CME USD/CNH futures contractFollowing in the footsteps of CME Group’s 40 year history

of offering the first financial futures, CME launched an

Offshore Chinese renminbi (CNH) futures contract in

February 2013. The launch of the CME USD/CNH futures

contract was driven by several factors:

▶ rapidly increasing market liquidity in CNH spot,

▶ client demand,

▶ as well as a strategic focus and CME’s commitment to

the development of Chinese renminbi exchange-traded

products.

CME offers both onshore and offshore trading in Chinese

renminbi; CNY representing the onshore (cash-settled)

products and CNH representing the offshore (physically

deliverable into Hong Kong) products.

As the underlying cash market grows, we anticipate the

proliferation of derivative hedging products for clients to

manage RMB risk. In particular, CNH options have grown

in liquidity and popularity as a risk management tool.

Some estimate CNH option liquidity to be around $9-17bn

though patchiness in liquidity exists. Accurate OTC figures

are difficult to obtain because of the speed at which this

market is growing. CME is currently assessing launching

USD/CNH options on futures.

CME’s USD/CNH futures contract is a young and growing

contract which illustrates hedging trends in CNH,

distinguished from hedging trends of other currencies.

The majority of the open interest (OI) held is down the

forward curve in the 6-12 month timeframe – see chart

below. Of note, most of CME’s FX futures contracts have

the bulk of OI in the front month.

USD/CNH Open Interest by Contract Month

3) Bank of International Settlements Triennial Central Bank Survey, FX turnover in April 2013

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Hedgers can benefit from CNH futures as a proxy for spot

FX as well as hedging CNH exposure along the forward

curve. It is provided by monthly contract settlement dates

either as a spread (e.g. 1m vs 9m) to replicate an FX swap

or as an outright trade to mirror the FX forward market.

In addition, CNH traded via OTC derivatives tends to be

more credit intensive to hedge than say, Euro. Trading via

CNH futures on CME provides reduction of counterparty

risk and capital efficiency via a clearing house where CNH

positions can be netted with margin and settlement

benefits. Central clearing through CME also provides the

benefit and protection of a clearing house, which ensures

the financial integrity of each transaction.

Finally, Globex (CME’s electronic exchange) offers price

discovery and distribution to over 150 countries, trading

anonymity, and execution confidence.

The time to consider hedging and expressing market

views via CNH futures is compelling now more than ever.

Sandra Ro

Executive Director

FX & Metals Research & Product Development

Will Patrick

Executive Director

FX Products EMEA & Asia

CME Group

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SGX FTSE China A50 Index Futures Gains Traction as Hedging Tool

Following the recent slump in Chinese equities, turnover

has fallen and margin debt has receded as retail investors

surrendered their positions. The swift downturn had led to

intervention by Beijing and left investors doubting the

government’s commitment to the internationalisation of

its financial markets.

Yet despite the selldown, China’s exchanges with a market

capitalisation of US$7.3 trillion (24 July) and daily turnover

of US$140 billion (1 January-24 July 2015), is too large to

ignore.

▶ Demand for SGX’s US dollar-denominated FTSE China A50 Index Futures increased amid intense interest in mainland equities. Presently, the Chinese equity market is the second largest in the world.

▶ Featuring 16.5 hours of extended trading, spanning into European and US time zones, the SGX FTSE China A50 Index Futures is an ideal instrument for market participants to respond to news and to manage their exposure to Chinese equities during periods of elevated volatility.

Earlier, the FTSE Group made the announcement to include

China stocks in two new emerging-market indexes. The

new indices, named FTSE Emerging Markets China A

Inclusion Indexes, will initially have a 5% weighting for

China A-shares. That will rise to 32% when Chinese

A-shares become fully available to international investors.

Elsewhere, index provider, MSCI is continuing talks to

include China A-shares, in spite of the unprecedented

government intervention.

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Over the past few months, Beijing had expanded the

Renminbi Qualified Foreign Institutional Investor (RQFII)

and Qualified Foreign Institutional Investors (QFII)

programmes and initiated the creation of other financial

products such as the SSE50 index options, which

increased trading interest in Chinese equities.

As a result, the Singapore Exchange (SGX) FTSE China

A50 Index Futures attracted and continued to interest a

wide base of participants including banks, asset

managers, hedge funds and proprietary trading firms.

Open interest has grown over 240% since a year ago to

US$8 billion in notional value.

Growth of SGX FTSE China A50 Index Futures

Source: Singapore Exchange as of 29 July 2015

Daily average volume of the contract soared to 665,407 or US$8.25 billion in notional value at the end of June.

With more than 16 hours of trading, extending into

European and US time zones, the SGX FTSE China A50

Index Futures is an convenient instrument for market

participants to respond to off-market news and to manage

their exposure amid heightened volatility. Bid and offer

spread averaged around 2.5 basis points during onshore

trading hours.

June 2015 Average Bid Offer Spread and Traded Volume (T Session)

Source: Singapore Exchange as of 29 July 2015

June 2015 Average Bid Offer Spread and Traded Volume (T+1 Session)

Source: Singapore Exchange as of 29 July 2015

Taking a position in response to off-market market news is

an instance of the applicability of the SGX FTSE China A50

Index Futures. On 4 February, the People’s Bank of China

(PBOC) announced a cut in the banks’ reserve

requirement ratio (RRR) by 50 basis points to 19.5% on its

website at 1821 hour (Singapore Time). Likewise, traders

took advantage of the extended trading hours of the

contract to manage their exposure.

100.000

200.000

300.000

400.000

500.000

600.000

700.000

Jan-

14Fe

b-14

Mar

-14

Apr

-14

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Ope

n In

tere

st

Growth of SGX FTSE China A50 Index Futures

Daily Average Volume Open Interest

0

Volu

me

0

200

400

600

800

1000

1200

5:30

p.m

6:00

p.m

6:30

p.m

7:00

p.m

7:30

p.m

8:00

p.m

8:30

p.m

9:00

p.m

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:30

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Ave

rage

Tra

ded

Volu

me

Volume Spread

010.00020.00030.00040.00050.00060.00070.00080.00090.000

0,0

0,5

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1,5

2,0

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9:00

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Tra

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Volu

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Bid

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prea

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Volume Spread

3,5

4:30

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5:00

p.m

0

1,0

2,0

3,0

4,0

5,0

Bid

/ O

ffer S

prea

d (a

s %

of B

id P

rice)

in b

.p.

100.000

200.000

300.000

400.000

500.000

600.000

700.000

Jan-

14Fe

b-14

Mar

-14

Apr

-14

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Ope

n In

tere

st

Growth of SGX FTSE China A50 Index Futures

Daily Average Volume Open Interest

0

Volu

me

0

200

400

600

800

1000

1200

5:30

p.m

6:00

p.m

6:30

p.m

7:00

p.m

7:30

p.m

8:00

p.m

8:30

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9:00

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9:30

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10:0

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0 p.

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:30

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Ave

rage

Tra

ded

Volu

me

Volume Spread

010.00020.00030.00040.00050.00060.00070.00080.00090.000

0,0

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Volume Spread

3,5

4:30

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5:00

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0

1,0

2,0

3,0

4,0

5,0

Bid

/ O

ffer S

prea

d (a

s %

of B

id P

rice)

in b

.p.

100.000

200.000

300.000

400.000

500.000

600.000

700.000

Jan-

14Fe

b-14

Mar

-14

Apr

-14

May

-14

Jun-

14Ju

l-14

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15

Ope

n In

tere

st

Growth of SGX FTSE China A50 Index Futures

Daily Average Volume Open Interest

0

Volu

me

0

200

400

600

800

1000

1200

5:30

p.m

6:00

p.m

6:30

p.m

7:00

p.m

7:30

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8:00

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8:30

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ded

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Volume Spread

010.00020.00030.00040.00050.00060.00070.00080.00090.000

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Volume Spread

3,5

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5:00

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0

1,0

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5,0

Bid

/ O

ffer S

prea

d (a

s %

of B

id P

rice)

in b

.p.

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All rights in the FTSE China A50 Index (the “Index”) vest in FTSE International Limited (“FTSE”). “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence.

The SGX FTSE China A50 Index Futures (the “Product”) has been developed solely by Singapore Exchange Derivatives Trading Limited. The Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by Singapore Exchange Derivatives Trading Limited.

Contract SpecificationsProduct Name SGX FTSE China A50 Index Futures

Contract Size US$ 1 x SGX FTSE China A50 Index Futures Price

Ticker Symbol CN

Contract Months 2 nearest serial months and March, June, September and December months on a 1 year cycle

Tick Value 2.5 index point (US$2.5)

T session: 9.00am – 4.00pm

T+1 Session : 4.40pm -2.00am

Last Trading Day (LTD) Second last business day of the contract month

Daily Price Limits Whenever the price moves by 10% in either direction from previous day settlement price, trading at or within a price limit of 10% is allowed for the next 10 minutes. Thereafter, trading is allowed at or within a price limit of 15% in either direction from the previous day’s settlement price. When this limit is reached, there shall be a further 10-minute Cooling Off Period* in which trading is allowed at or within a price limit of 15%. After which, there shall be no price limits for the remainder of the trading day

Position Limits A person shall not own or control more than 15,000 contracts net long or net short in all Contract Months combined, unless otherwise separately approved by the Exchange.

Final Settlement Price The Final Settlement Price shall be the official closing price of FTSE China A50 Index rounded to the nearest 2 decimal places.

Settlement Basis Cash settled (USD)

Margins Offset Yes.

Price Information (Vendor: Ticker)

Bloomberg: XUA ‹INDEX› CT

The Exchange will signal the commencement of the Cooling Off Period when there is an unsatisfied bid or offer at the prevailing Upper Price Limit or Lower Price Limit respecti-

vely for a continuous period of more than ten seconds. The Exchange retains the discretion to take into account any other factors in the market in determining the commence-

ment of the Cooling Off Period.

Source: Singapore Exchange as of 03 August 2015

Donavan Lim

Singapore Exchange

Fundamentals of FTSE China A50 Index Futures Denominated in US dollar, the SGX FTSE China Index

Futures is based on the underlying FTSE China A50 Index,

which comprises 50 of the premier A-shares.

The FTSE China A50 Index has a correlation of above 90%

with major onshore indices, which makes the SGX FTSE

China A50 Index Futures an ideal hedging tool for Chinese

equities.

Correlation Matrix (30 June 2014 to 30 June 2015 -1 year daily)

Indices FTSE China A50 Index FuturesCSI 300 Index 94.1%

SSE 50 Index 99.5%

MSCI CHINA A 89.7%

CSI 500 56.5%

FTSE China A50 Index 95.0%

Source: Bloomberg as of 03 August 2015

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European Central Bank

Status of TARGET2 Securities (T2S) projectThe first wave of T2S was completed on 22 June with the

migration of the participating CSDs, i.e. the Bank of

Greece Securities Settlement System (BOGS), Depozitarul

Central (Romania), the Malta Stock Exchange and SIX SIS

(Switzerland) for the settlement of euro transactions.

The situation as at 29 July is that T2S services are

operating normally in accordance with the T2S schedule.

The assumption had been that Monte Titoli (Italy) would

also migrate to T2S in the first wave, but this has now

been rescheduled for 31 August. This new migration date

is subject to the approval of the ECB’s decision-making

bodies.

The next wave (2) is scheduled for 28 March 2016, which

is when the ESES CSDs (i.e. Euroclear Belgium, Euroclear

France and Euroclear Nederland), Interbolsa (Portugal) and

National Bank of Belgium Securities Settlement Systems

(NBB-SSS) will be migrating. This date is also important for

ABN AMRO Clearing (AAC) as AAC will be connected as a

direct participant to T2S in the second wave.

On Wednesday, 29 July, the task force set up to analyse

the impact of Monte Titoli’s delayed migration to T2S

presented its findings and recommendations to the CSD

Steering Group (CSG). The CSG unanimously decided to

delay community testing for T2S migration Wave 2, to

allow for certain testing activities to be rescheduled, ahead

of the start of the community testing phase.

Mandatory ESES-T2S community testing will now begin

on 19 October 2015, not 21 September, as was originally

communicated.

The date of the ESES migration to the T2S platform for the

production environment remains unchanged: 28 March

2016.

Here is a link to the latest version of the T2S FAQ

document.

A single point of access to all the T2S-related information

from each CSD is available here.

Upcoming T2S Advisory Group meetings:16-17 November 2015

T2S website

Trading venues

Euronext (EN)Expansion of Euronext Fund Services to include open-end funds on Euronext ParisEuronext announced on 24 July that it would be launching

a new service to allow open-end funds to be admitted to

Euronext Paris and made available for trading on the

Euronext Fund Services platform. The launch of the service

on the production platform is planned for Q1 2016.

Disaster Recovery TestEuronext reported on 24 June that a successful disaster

recovery test conducted with customers in its cash and

derivatives markets on 20 June had confirmed both the

high availability of core systems and customers’ ability to

reconnect and recover their trading systems effectively.

The results will help the exchange to safeguard the

continuity of trading services across all instruments and

for all customers.

The latest news is available online here.

Market Infrastructure update: August 2015 news from the financial

& securities industry

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Deutsche Börse (DB)Deutsche Börse announced on 27 July that Deutsche

Börse AG and SIX Group AG had entered into a binding

agreement for the full acquisition of the STOXX AG and

Indexium AG joint ventures by Deutsche Börse. Both

parties intend to complete the transaction by the end of

July.

Deutsche Börse on 26 July announced that it had signed a

definitive agreement regarding the full acquisition of 360T,

a leading global FX trading platform catering to a broad

customer base including corporates, buy-side firms and

banks. The completion of the transaction is subject to the

approval of the competition and supervisory authorities.

The latest news is available online here.

London Stock Exchange Group (LSEG)London Stock Exchange plc announced on 15 June that it

had received regulatory approval from Hong Kong’s

Securities and Futures Commission for Hong Kong firms

to become members of the London Stock Exchange.

The latest news is available online here.

Nasdaq OMX Group (NOG)Nasdaq announced on 4 June it was planning to provide a

choice of CCP providers in Nordic cash equities for its

members on the Nasdaq exchanges in Stockholm,

Helsinki and Copenhagen.

Nasdaq and SIX Swiss Exchange have agreed to introduce

additional CCPs to their local markets. In addition to SIX

x-clear AG, Nasdaq will introduce LCH.Clearnet Ltd as a

cash equity CCP provider. Both SIX x-clear AG and LCH.

Clearnet Ltd will become interoperable with Nasdaq’s

existing clearing partner in the Nordics, i.e. European

Central Counterparty N.V. (Euro CCP).

Nasdaq is currently working with its partners to decide

when these initiatives will be delivered. Nasdaq will advise

the market as soon as a firm timeline has been agreed.

Both initiatives are subject to regulatory consent or the

approval of the relevant regulators, including the

regulators of Nasdaq Nordic exchanges.

The latest news is available here.

The Order Machine (TOM)The district court in the Hague ruled in the dispute

between Euronext and TOM on 22 July. Information on

Euronext’s TOM-related claims, including both those

claims that were awarded and those that were rejected, is

online available here.

Central counterparties (CCPs)The list of central counterparties (CCPs) authorised to

offer services and perform activities in the European

Union in accordance with the European Market

Infrastructure Regulation (EMIR) is online here.

On 2 July, the European Securities and Markets Authority

(ESMA) issued its final report on interoperability

arrangements between EU-based clearing houses (CCPs),

as required under the European Markets Infrastructure

Regulation (EMIR) and related guidelines and

recommendations. In its report, ESMA recommended

extending the EMIR provisions on interoperability to

exchange-traded derivatives (ETDs). The possibility of

further extending the provisions to OTC derivatives will be

examined at a later stage. ESMA will be presenting the

final report to the European Commission, the European

Parliament and the European Council for endorsement.

The Report is online available here.

LCHClearnet Group (LCG)LCH.Clearnet SA announced on 23 June that its CDSClear

service had started clearing Markit iTraxx Senior Financials

Indices along with all the single-name constituents of

these indices. This is a significant development for the

industry as this is the first time that credit default swap

(CDS)-referencing banks, including some of CDSClear’s

clearing members, can be centrally cleared.

The latest news is available online here.

Eurex Clearing AGOn 22 July, Deutsche Börse Group received full regulatory

approval from the Monetary Authority of Singapore (MAS)

to operate Eurex Clearing Asia. The next step is for

Deutsche Börse to apply for Eurex Clearing Asia to be

recognised by the European Securities and Markets

Authority (ESMA) as a third-country central counterparty in

Europe. Once ESMA approval has been granted, Asian

clearing services will also be accessible to market

participants in the European Union.

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The latest news is available online here.

European central securities depositories (CSDs)

Clearstream Banking Frankfurt (German CSD)A new direct link to LuxCSD went into operation on 22

June. CBF will be using this new link to offer free-of-

payment and against-payment settlement in EUR and all

foreign currencies from CBF (account 4497) to LuxCSD.

LuxCSD account-holders will be able to settle LuxCSD-

issued securities directly with their counterparties in the

German domestic market. The new settlement agreement

also supports the listing of LuxCSD-issued securities on

the Frankfurt stock exchange; these securities will

henceforth be available for use by Clearstream Banking

Luxembourg customers.

EU regulatory news

European Market Infrastructures Regulation (EMIR) in force since 16 August 2012On 17 July, the ESMA published the responses it had

received to the Consultation Paper on clearing obligation

No 4 under EMIR. The response are online available here.

The latest news is available at:

EC website

ESMA website

Central securities depositories (CSDs) and certain aspects of securities settlement (CSD Regulation; in force since 17 September 2014)On 18 June, the European Securities and Markets

Authority (ESMA) published a letter informing the

European Commission of its intention to delay its draft

technical standards (TS) for the Central Securities

Depositories Regulation (CSDR) to September 2015. The

initial delivery date for the CSDR TS was 18 June 2015.

On 30 June, ESMA published a consultation paper on the

Draft Regulatory Technical Standards for the operation of

the buy-in process (part of the CSD Regulation). The

deadline for the submission of comments is 6 August.

Click here for the full text of the CSDR.

ESMA website

Reviews of the Markets in Financial Instruments Directive/Regulation (MiFID/MiFIR II) and Market Abuse Directive/Regulation (MAD/R II)

Status of MAD/R IIWith the exception of the implementing measures which

have to be taken by ESMA and/or the European

Commission, the Market Abuse Regulation will come into

force on 3 July 2016. The new powers of the national

competent authorities will have to be laid down in national

laws before that date. The provisions on OTFs, SME

growth markets and emission allowances will apply from 3

January 2017.

The Market Abuse Sanctions Directive entered into force

on 2 July 2014. The member states are required to

transpose the Directive into their national laws by 3 July

2016.

Website

ESMA website

Status of MiFID/R IIThe Level 1 MiFID II and MiFIR texts were published in

the Official Journal on 12 June 2014 and came into force

20 days later, i.e. on 3 July 2014.

MiFID/R II will apply from 3 January 2017. The EU member

states are required to adopt and publish measures

transposing MiFID II and the delegated acts into their

national laws by 3 July 2016. It is not known when the

MiFID II Implementation Act 2014 will enter into effect.

Legislative proposals for the underlying legislation are not

yet available.

Indicative timeline and activitiesThe European Securities and Markets Authority (ESMA)

has published its final report on MiFID II-MiFIR draft

technical standards (RTS) on the authorisation, passporting

and registration of third-country firms and cooperation

between competent authorities. This final report covers

the majority of the draft RTS and ITS on investor

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protection topics which ESMA is expected to develop.

The remaining draft technical standards that ESMA is

mandated to develop under MiFID II and MiFIR will be

published by the end of 2015.

The final report on authorisation, passporting, and

registration was submitted to the European Commission

on 29 June. The European Commission has three months

to endorse the draft RTS and ITS standards. A second set

of RTS and ITS on secondary market issues will be

delivered in September and December respectively.

European Commission website

ESMA website

Securities Financing Transactions Regulation (SFTR) On 17 June, the European Commission welcomed a

political agreement on the proposal for a regulation on

reporting and the transparency of securities financing

transactions (known as SFTR). The agreement follows

negotiations between the European Commission, the

European Parliament and the Council of the EU to find

common ground on the regulation. The proposed

regulation aims to increase the transparency of certain

transactions in the shadow banking sector to prevent

banks from circumventing rules by moving activities to the

shadow banking sector. The agreement will significantly

improve the transparency of securities financing

transactions and help identify their risks and magnitude.

The political agreement will be subject to technical

finalisation before a draft can be endorsed by the Council

and the ECON Committee. As soon as the official legal

text is ready, Parliament will put it to a plenary vote in

October. The final text will also need to be

endorsed by EU member states.

What is the Securities Financing Transactions

Regulation?

The European Commission wants to increase the

transparency of securities financing transactions markets,

which are not currently covered by other regulations. This

regulation will require firms to report their SFTs to an

approved EU trade repository. Broadly speaking, a

securities financing transaction (SFT) is any transaction in

which securities are used to borrow cash or vice versa.

In practical terms, SFTs include repurchase agreements

(repos), securities lending activities, and sell-back and

buy-back transactions.

What is the indicative timeline for the SFT regulation?

On 29 January 2014 the European Commission published

a proposal to regulate SFTs, including a timeline for its

publication and implementation. The Commission

anticipates that it will be published and will enter into force

towards the end of 2015. Following this, ESMA will issue

draft regulatory and implementing technical standards.

The Commission expects the SFT regulation to enter into

force in 2017, after which many firms will be obliged to

report to a trade repository any SFTs in which they

engage.

Which firms will be affected?

The proposed regulation covers SFTs performed by any

firms established in the EU, regardless of the location of

the individual branch in question. It also includes SFTs

conducted by EU branches of non-EU firms, and any SFT

in which the securities used are issued by an EU issuer or

by an EU branch of a firm. The proposal also explicitly

identifies UCITS funds and AIFM funds as being subject to

the regulation in its final form.

How will SFT Regulation affect you?

Although full details have yet to be published, the SFT

regulation will require firms to report all their SFTs to an

EU trade repository.

Website

Press releases of the political agreement are available at:

European Council

European Parlament

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US regulatory updates

Below follows a selection of key regulatory developments produced specially for the clients of

ABN AMRO Clearing in Chicago. We hope that you will find this a valuable tool for keeping track of

the regulatory and industry changes that may affect your business.

SEC invites comments on exchange-traded productsOn 12 June, the US Securities and Exchange Commission

(SEC) issued a news release seeking public comment to

help inform its review of the listing and trading of new,

novel or complex exchange-traded products (ETPs). The

release begins by listing ETPs and describing the SEC’s

oversight of these products. The release concludes by

soliciting public comment to inform the SEC’s review of

this market, including both the exemptive and no-action

relief granted to ETPs under the Securities Exchange Act

of 1934 and the requirement that a national securities

exchange have SEC-approved listing standards applicable

to the ETP securities being traded.

The release also seeks comment on the ways that broker-

dealers market ETPs and on investor understanding of the

nature and uses of ETPs. More specifically, the release

seeks responses to questions posed by the SEC in the

following categories:

▶ ETP arbitrage mechanisms and market pricing;

▶ Securities Exchange Act exemptions and no-action

positions (specifically the application of Rules 101 and

102 of Regulation M to ETPs);

▶ exchange-listing standards; broker-dealer sales prac-

tices and investor understanding and use of ETPs;

▶ a catch-all category containing questions regarding the

consequences of an ETP’s closure and the application

of market structure research and interactive data visua-

lisation tools provided by the SEC, and requesting

explanations for the ETP market’s rapid growth and

forecasts for the future of the ETP market.

Additional information is available here.

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SEC Commissioner advocates expanding Reg. SCI to address cybersecurity concernsOn 25 June, SEC Commissioner Luis Aguilar addressed

the Security Innovation Network Innovation Summit on ‘A

threefold cord – working together to meet the pervasive

challenge of cyber-crime.’ Commissioner Aguilar proposed

that the SEC amend Regulation Systems Compliance and

Integrity (‘Reg. SCI’). Reg. SCI, which became effective on

3 February of this year (with a compliance date of 3

November 2015), applies to self-regulatory organisations,

clearing agencies and alternative trading systems. Reg.

SCI requires a robust set of cybersecurity protocols,

including:

▶ continual monitoring of systems;

▶ conducting capacity stress-testing;

▶ responding promptly to any system breaches;

▶ reporting any intrusions to the SEC within 24 hours;

▶ reporting quarterly to the SEC about any system

changes; and

▶ conducting an annual Reg. SCI compliance review.

Commissioner Aguilar claimed that the SEC needs to

expand Reg. SCI. ‘Unfortunately, Regulation SCI does not

apply to many of the important segments of the capital

markets,’ Aguilar said. ‘Obviously, more work is needed to

ensure the Commission’s cybersecurity rules address all

areas of the market we regulate and that our economy

relies on,’ he said. For the first of his three concluding

points, Commissioner Aguilar said, ‘The Commission

needs to expand the scope of Reg. SCI to reach other

crucial market participants. This should be a top priority.’

Additional information on Commissioner Aguilar’s speech

can be found here.

Futures Traders/brokers in European natural gas and electricity future or swap products may require registration

‘Market participants’ that transact in ‘wholesale energy

markets and products’ will fall under the jurisdiction of

REMIT

‘Market participants’ also include parties that ‘place’

orders to trade in one or more wholesale energy markets

Clients that trade or broker natural gas and electricity

futures or swap products on European exchanges should

be aware that they may be required to register with a

European energy regulator and report such activity with

effect from October 2015. The relevant legislation, the

Regulation on Wholesale Energy Market Integrity and

Transparency (REMIT), was passed by the European

Parliament in 2011, with the objective of providing a

consistent EU-wide framework for the regulation of EU

wholesale energy markets with the specific mandate of

protecting such markets from manipulation and insider

trading abuses.

The Agency for the Cooperation of Energy Regulators

(ACER) was established to administer the new legislation.

Under the terms of REMIT, ‘market participants’ that

transact in ‘wholesale energy markets and products’ will

fall under the jurisdiction of REMIT. The term ‘market

participants’ is generally defined as commercial electricity

and natural gas entities that participate in EU gas and

electricity markets, including entities that transport,

produce or make use of such commodities. ‘Market

participants’ also include parties that ‘place’ orders to

trade in one or more wholesale energy markets. Products

are limited to electricity and natural gas products and

include exchange-traded futures and options traded on

ICE Futures Europe, ICE-ENDEX, CME Europe and

NASDAQ OMX. REMIT applies to market participants both

within and outside the EU.

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DisclaimerThis brochure is provided for the general information of the customers of ABN AMRO Clearing Chicago LLC (AACC) and contains infor-

mation that may be proprietary to AACC or those entities whose links are provided herein. No part of this brochure may be duplicated

or may be re-distributed without the prior consent of AACC. The material herein is gathered from and is based on information that

AACC considers reliable, but AACC does not represent that it is accurate, complete or current and it should not be relied on as such.

This document and any view or opinion expressed herein is for informational purposes only and is not, nor should it be construed as a

recommendation, an offer or solicitation, either express or implied, to buy or sell any security or to participate in any trading strategy

or to induce any other parties to buy or sell any security or to participate in any trading strategy. All images contained herein, including

text, photos, illustrations, graphs, (trade) names, logos, trade and services brands are fully owned or under license and are protected

by copyright, trademark rights and/or any other intellectual property rights. AACC is a broker/dealer and futures commission merchant

primarily regulated by the SEC, CFTC, CBOE, FINRA (www.finra.org), NFA and the CME Group. AACC does not provide tax, accounting, or

legal advice and all readers should consult their own regulatory or financial advisors before acting on any of the information contained

herein. This is not a research report prepared by AACC or any affiliate. AACC is a member of SIPC, which protects securities customers

up to $500,000 (including $250,000 for claims for cash). Futures and options products carry a high degree of risk and are not suitable for

all investors. Visit our website for more information and find financial and other disclosures here.

If an entity falls under REMIT, it will be required, among

other things, to register with a National Regulatory

Authority, i.e. the ‘local’ energy regulator such as the UK’s

Office of Gas and Electricity Markets (OFGEM) if it

transacts on ICE Futures Europe and to report its

transactions to ACER. ACER provides specific guidance on

REMIT and which entities are required to register and

report. Transaction reporting requirements may, however,

be fulfilled if an entity is already reporting such

transactions under EMIR.

For additional information, see the ACER website.

Reference materials:

Third Edition of ACER REMIT Guidance.

ACER Transaction Reporting User Manual (TRUM).

OFGEM’s website on its REMIT role.

A summer must-read The Katten law firm recently released a comprehensive

review of cybersecurity and the question of where the

financial industry finds itself today in combating the

ever-increasing number of cyber-attacks.

The articles included in the review address topics such as

the action taken by various industry regulators,

cybersecurity ‘best practices’ for financial firms, and the

cybersecurity evaluation of third-party service-providers.

Web links to a number of relevant cybersecurity

documents and articles are also included.

This resource-rich document is located on the

Katten website.

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Below an overview of events where ABN AMRO Clearing

participated or will participate and has representatives attending.

Europe

21 AugustSAIL Amsterdam 2015

Location: Amsterdam

AAC Representatives

10-11 September2nd Annual Post Trade Forum & Trade Show

Location: Vienna

Jan Bart de Boer will participate in the panel:

Update on CCP Clearing: the GCM’s perspective

28-29 SeptemberPractical Approaches to Implementing

OECD Common Reporting Standards

Location: London

Manja de Goede-Kisman will participate in the panel:

Onboarding and KYC in the CRS environment

20 October2015 ECMI Annual Conference

Location:

Jan Bart de Boer will participate in the panel :

Unravelling Penelope’s web: Crisis management and

resolution of financial market infrastructure

.

event calender

What’s Next? Is a quartely publication of Corporate Banking.

Editors

Robbert Booij

Patrick Curran

Laura de Haan

Ewout Huizingh

Charlotte Hulsenbeck

Victoria Leigh

Tony Orfanos

Pauliene Schouten

Geert Vanderbeke

Henk van Vliet

David West

Joost Wokke

DisclaimerThis brochure is provided for the general information of the customers of ABN AMRO Clearing Chicago LLC (AACC) and contains infor-

mation that may be proprietary to AACC or those entities whose links are provided herein. No part of this brochure may be duplicated

or may be re-distributed without the prior consent of AACC. The material herein is gathered from and is based on information that

AACC considers reliable, but AACC does not represent that it is accurate, complete or current and it should not be relied on as such.

This document and any view or opinion expressed herein is for informational purposes only and is not, nor should it be construed as a

recommendation, an offer or solicitation, either express or implied, to buy or sell any security or to participate in any trading strategy

or to induce any other parties to buy or sell any security or to participate in any trading strategy. All images contained herein, including

text, photos, illustrations, graphs, (trade) names, logos, trade and services brands are fully owned or under license and are protected

by copyright, trademark rights and/or any other intellectual property rights.

AACC is a broker/dealer and futures commission merchant primarily regulated by the SEC, CFTC, CBOE, FINRA (www.finra.org), NFA and

the CME Group. AACC does not provide tax, accounting, or legal advice and all readers should consult their own regulatory or financial

advisors before acting on any of the information contained herein. This is not a research report prepared by AACC or any affiliate. AACC

is a member of SIPC, which protects securities customers up to $500,000 (including $250,000 for claims for cash). Futures and options

products carry a high degree of risk and are not suitable for all investors. Visit our website for more information and find financial and

other disclosures here.

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