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Chinese Markets STEP Forward with China FIX

Dr. Bai Shuo of the Shanghai Stock Exchange (SSE) explains the importance of the STEP Protocol and its development in China.

Dr. Bai Shuo, Shanghai Stock ExchangeHow did the STEP Protocol begin and which organisations originally developed it?

Back in 2003, at the same time when the SSE began to prepare the Next Generation Trading System (NGTS) project, which would later go live on Nov 23, 2009, the SSE decided to introduce a message-based protocol between the exchange and brokers, which is widely accepted to be FIX. The pioneering work was encouraged by the China Securities Regulatory Commission (CSRC).

Under the framework of national standardization, this protocol became one of the eight standards in the securities industry. The WG01 group was responsible for the drafting of the protocol under the direction of the CSRC. The membership of the WG01 group includes: SSE, Shenzhen Stock Exchange (SZSE), Shanghai Futures Exchange (SHFE), Guoxin Security Co. and some other securities companies. The protocol, which is informally called Chinese FIX, or CFIX, is named STEP (Securities Trading Exchange Protocol), as it is regarded as the initial ‘step’ towards a first-class stock market. STEP 1.0 was written in 2004 and issued in 2005. STEP was revised as version 1.1 in 2006.

How does STEP fit into China’s overall usage of standards in the financial world?

While FIX is a global standard in the securities industry, STEP is more suitable for the Chinese market, since STEP introduced many native business and local definitions. The CSRC is responsible for the STEP standard. The SSE has agreed to use STEP and is eager to promote STEP, so as to encourage brokers to follow STEP. In China, investor accounts that should be supervised are designed to be contained in Parties component block. Tags in range 8500 to 8540 are allocated for Chinese market usage, such as market data delivery and business for funds, warrants and voting. Quite a few tags are enhanced for local businesses, such as tag 40 (OrdType), tag 103 (OrdRejReason), tag 269 (MDEntryType), tag 326 (SecurityTradingStatus).

What is the scope of STEP’s usage? What parts of the trading cycle was it intended to cover and what asset classes is it used for?

STEP covers the pre-trade and trade parts of trading cycle, as well as some specific registering instructions. STEP is used for stocks, funds, bonds, warrants, ETFs, and lots of featured non-trading businesses, such as IPOs, right issuances, fund creation and redemptions, warrant executions, bond deposit and withdrawals, voting, etc.

Who were the early adopters of STEP? Who currently uses STEP and for what?

The SSE uses STEP for level2 market data service. Information vendors have taken STEP for level2 service in the meantime. Creative businesses like this are suitable to take the new protocol standard in order to have the ability to easily maintain and extend, without a burden to support a legacy interface.

What is the next stage in the development of STEP? Where is adoption of STEP going to grow most significantly in the near future? Are there new goals or applications for STEP?

STEP is under revision as many new businesses were introduced during the last five years. STEP is considered easier to be adopted in market data and other creative businesses. Also, STEP over FAST will be used for SSE level 1 market data delivery. Block trading, quote repo, agreed repo and margin financing on the Alternative Trading Platform (ATP) of the SSE will take STEP as the format for business records. Traditional trading business will gradually be enhanced to support STEP in near future as we get more confidence through the experience on creative business.

Source: FIXGlobalTrading, 15.09.2011
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Filed under: Asia, China, Exchanges, FIX Connectivity, Market Data, Trading Technology, , , , , , , , , , , , , , , , ,

Commodity Webinar: How to access China? A Foray into the Chinese Capital Markets

With the opening of the financial markets in China, trading firms from around the world are increasingly interested in the these markets. While the volumes at the three commodity exchanges in Dalian, Shanghai, and Zhengzhou dropped to 470 million lots in the first six months of 2011, compared to 762 million in the same period in 2010, trading opportunities in the world’s biggest commodity markets are plentiful.

Our distinguished speakers will not only share their knowledge about the Chinese market structure, the participants and trading opportunities, but equally important, they will explain how to capture those opportunities in a jungle of regulations, cultural differences and technological challenges. How to access China successfully.

Please join us for this webinar moderated by Chris Hall, Editor in Chief, THE TRADE (ASIA) on Thursday, September 29th at

10am Chicago   4pm London    11pm Shanghai

Panelists
Nick Ronalds, Executive Director, FIA Asia
Dean Owen, Chief Representative & SVP, China, Newedge
Steffen Gemuenden, CEO, RTS Realtime Systems

Who should attend? Firms looking to capture opportunities in the Chinese Derivatives markets including:
• Proprietary Trading firms
• Hedge Funds
• Brokers
• Supply Chain Management firms

Please register here.

This webinar is free to attend. Please feel free to send this invitation to interested colleagues.

*If this timing does not work for you, please still register for the webinar. A recording will be made available to all who register.

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China Regulators: Careful preparations ahead of Index Futures

The long-awaited stock index futures in the mainland market still need careful preparation due to changing situations, a senior official with the China Securities Regulatory Commission (CSRC) said, dampening market hopes that the product will kick off year.

At the half-yearly work meeting of the CSRC this week, a senior official said the regulator will continue preparatory work for the stock index futures under the principle of pursuing high standards and a smooth start, China Business News reported Thursday, quoting a source who attended the meeting as well.
While fortifying operations for existing futures products, the regulator will introduce new trading products steadily, the official said.

Currently, the nation’s fuel oil and metal futures contracts are traded in the Shanghai Futures Exchange, while farm produce futures deals are made in Zhengzhou and Dalian.

Established in 2006, the China Financial Futures Exchange will cover trading of Financial derivatives, including the stock index futures. Its virtual transaction is already under way.
Previously, there were market rumors that preparations for the index futures were close to an end and the launch was just around the corner.

Although the regulator has expressed similar expectations on different occasions, the situation has changed beyond the original plan so far, the CSRC official said. He vowed that financial authorities will review the market performance and make relevant preparations.
The official noted that the regulators will carefully consider individual investors’degrees of acceptance in the design of index futures. They will also draw lessons from warrants issued to prevent excessive speculation.

Last week, a source from China International Capital Co said the stock index futures trading is likely to be launched in January of next year rather than sometime this year after the Beijing Olympics.
The source stressed that the authorities deemed it prudent to launch index futures trading in a stable stock market environment with limited daily price fluctuations.

Source: SINA.com, CITIC Futures, Mr. Liang Haisan, 01. August 2008

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