FTSE/Xinhua Index to appeal court ruling

A Shanghai court ruled on October 31 that FTSE/Xinhua Index, a provider of China equity indexes, had breached its contract with a subsidiary of the Shanghai Stock Exchange by using its data to compile a Chinese A-share index to trade futures contracts in Singapore. FTSE/Xinhua said it will appeal the ruling to a higher court.

The Pudong New District Court terminated the contract that was signed last December and ordered FTSE/Xinhua to pay $20,000 in damages, Paul Hoff, the Tokyo-based director of FTSE/Xinhua and managing director for Asia-Pacific at the FTSE Group, told RiskNews.

The lawsuit was prompted by FTSE/Xinhua’s use of Shanghai stock exchange unit SSE Infonet’s China A-shares data in FTSE/Xinhua China A50 index futures, which were launched on the Singapore stock exchange on September 5.

The Singapore stock exchange said in a statement that it is committed to the continued listing of the index futures, and that FTSE/Xinhua will honour its obligations in providing the index for the trading and settlement of the index futures.

FTSE/Xinhua will appeal the ruling to a higher court in Shanghai, said Hoff. “If we get the same ruling we are prepared to pay the fine, but that is not the issue. What we are concerned about is the freedom of information and our intellectual property rights that we have in our index, which we feel have not been respected by this ruling.”

Hoff said the ruling will not affect FTSE/Xinhua’s business, as it also uses data from an agreement with Shanghai Securities News signed in 2001 to calculate China equity indexes. Shanghai Securities News is a wholly owned subsidiary of Xinhua News Agency and Xinhua Financial Network, FTSE’s partners in the FTSE Xinhua Index.

“We felt that in order to have good relationships with the Shanghai stock exchange and to continue to try to develop our business inside China, we should have a data contract directly with the Shanghai stock exchange or its subsidiaries. We never needed it to function, it was an act of goodwill,” Hoff added.

“Index providers such as MSCI, S&P/Citic and Dow Jones do not need a contract in China to calculate China equity indexes and to license investment products,” said Fredy Bush, co-chairman of FXI in a statement. “We believe we should be treated in the same way as these index providers.”