The initial objectives for FIA-Asia are to
(1) Develop information about the markets and facilitate communication among its participants
(2) Promote cross border access to the markets
(3) Promote the advancement of the markets
(4) Provide education to market users
Following is a discussion of these objectives:
I. Develop information about the markets and facilitate communication among its participants
A major objective is to develop information about the derivatives markets in the various countries in the Region. Due to language barriers, differences in business and legal practices, regulations, etc. there are many difficulties to obtain and understand information that is needed by market participants outside the individual country. The Asian markets are not only growing rapidly but they are changing rapidly. There is a need to initially develop a database, and further, to develop a communication system to be able to obtain information about legal, regulatory and other changes.
As these developments and changes are taking place on a country-by-country basis, it is important for the leaders and participants in each country to have access to information about practices and requirements of potential market users outside their country. Information is needed about other Asian country practices and developments (intra-Asia) as well as US and European practices.
FIA serves as one of the primary industry sources for information about the industry. Establishing an Asian-wide organization will serve to provide better market information and more detailed regulatory and legislative information, which would enable all sectors of the industry to become more knowledgeable about doing business in the region. Plus, FCMs in the Asian region, as well as their customers, would become more knowledgeable about the development of the derivatives business in other parts of the world. It is possible for FIA-A, with the support of the global FIA, to speak on certain issues from time to time and be heard as an important international spokesperson.
Communication among the exchanges, regulators and market participants is not only useful in developing “Best Practices”, but considering the international nature of these markets, it is essential to promote and facilitate information sharing for regulatory purposes. This is consistent with the goals of the major regulators dealing with the issues of international market users. FIA-A can provide a regional facility for such purposes as is currently being done during the Annual meeting of FIA at the Boca Raton Regulators Conference.
II. Promote Cross Border Access to Markets
Each of the markets in Asia has an important interest in promoting cross border access to their own market. In some countries this interest is already being pursued. In other countries, where the derivatives markets are in earlier stages of development, the interest is being debated and they are cautious about moving forward. In any case, the FIA-A can play an important role in bringing the mutual interests together among the countries.
Exchanges, Regulators and FCM’s need an international vehicle to learn, discuss and communicate about the issues of cross border access. This means not only permitting foreign users (FCM’s and customers) to have market access, but also permitting local users (commercial and retail) to have access to markets outside their country.
III. Promote the Advancement of the Markets
The development of the Asian derivatives markets is not only dependent on the regulatory aspects, but on an understanding of international standards for product design, clearing functions, market integrity and financial safety rules and requirements, etc. FIA-A can support and facilitate advancement of these markets by bringing information and providing communication vehicles to bear in these developments. Further, actual marketing efforts in the Region can be facilitated through FIA-A activities. The connection to the FIA in Washington is the link to the global markets for this purpose also.
FIA-A would help to promote the derivatives business in Asia. US based FCMs and others around the world desire to expand their business into Asia by being able to more easily transact business in to and out of Asian markets. Many US investors are increasingly attracted to the growth opportunities in Asia and are looking for ways to participate in that growth. At the same time, there is a growing desire on behalf of Asian investors to transact business on US and other international markets. FIA-A would help to facilitate the flow of cross border business.
IV. Education for Market Users
Education for market user can be an important function for FIA-A. FIA resources, knowledge and materials can be brought to bear in Asia.
Education of retail investors and, in many cases, commercial hedgers, is sorely lacking throughout Asia. Retail investors in many Asian countries account for 70 to 80% of market share in equities. Derivatives’ trading is in many countries just getting started. Numerous instances can be cited where, so called, hedging activity was in fact, speculative in nature. These activities have resulted in significant losses, causing government officials and regulators to be more cautious about the development of derivatives trading and liberalizing regulation. FIA-A can become an important industry source for education in the region.
