Shanghai Stock Exchange's unit sues FTSE/Xinhua over data use

Hong Kong-based FTSE/Xinhua Index, a provider of China equity indexes, said it has received a lawsuit filed against it by SSE Infonet, a unit of the Shanghai Stock Exchange, but denies any breach of contract related to its plans to use Infonet’s data in soon-to-launch index futures contracts.

Under the terms of a contract between the two parties, FTSE/Xinhua has the right to use Infonet’s data to set up indexes based on shares listed on the Shanghai Stock Exchange. However, both sides are now arguing over whether that right extends to licensing derivatives.

The lawsuit follows plans by FTSE/Xinhua to use Infonet’s China A-shares data in  FTSE/Xinhua China A50 index futures, which are scheduled to be launched on September 5 on the the Singapore Stock Exchange (SGX). SGX spokesperson Magdalyn Liew told RiskNews the exchange will stick to its September 5 launch date despite the lawsuit.

Paul Hoff, Tokyo-based director of the FTSE/Xinhua Index and managing director for Asia-Pacific at the FTSE Group, told RiskNews the company has received a copy of the lawsuit, but maintains the agreement with Infonet gives it permission to use its data to create indexes as well as license derivatives. “We don’t believe that we’re in breach of any issues they’ve raised. We have had on-going communication but there was nothing indicating that they were going to take us to court. This is quite a departure from the conversations in the past,” said Hoff.

Li Mingliang, a lawyer with Shanghai Deheng law firm, was quoted in Hong Kong daily, the South China Morning Post, saying that the contract only gives FTSE/Xinhua the right to compile indexes and not to create derivatives, adding that the venture had overlooked the legal issues in China.

According to Chinese media reports, Shenzhen Securities Information, data provider for the Shenzhen Stock Exchange, has also pressed charges against FTSE/Xinhua. However, Hoff told RiskNews the company has not received any notification of such a lawsuit.

The heated sentiment could be a result of the head-to-head competition that SGX brings to the soon-to-launch China Financial Futures Exchange, which will trade stock, bond, interest rate futures and currency futures.

However, Hoff said there is no need for Chinese exchanges to feel threatened by the overseas exchanges. “This is something new, and they think it will have a negative impact on them. But look around the world and you’ll find futures contracts inside and outside countries, and in the long run, these contracts assist investors in controlling their risk.”