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The subject of SSE InfonetÆs claim is its agreement to provide data to FXI for its indices. It essentially argues that FXI cannot sell index information to other parties for the purpose of creating investment products.
SSE Infonet is an information provider controlled by the Shanghai Stock Exchange. The company could not be reached for comment.
SSE InfonetÆs breach of contract claim was launched in Shanghai on 28 August, after SingaporeÆs stock exchange said it would launch a China A-share futures contract using the FTSE/Xinhua index to determine the top 50 Shenzhen- and Shanghai-listed stocks by market capitalisation.
The court case began on Wednesday after FXI promised to take a hard line against the accusation that such a contract would breach the right of SSE Infonet and the Shenzhen exchange to control data on traded stocks, thereby breaching a contract between each of the exchanges to provide data to FXI.
FXI argues that stock exchanges across the world have no proprietary right to such data and should instead make it freely available.
Mark Makepeace, co-chairman of FXI, says in a statement: ôFXI is meeting the needs of domestic and international investors in China. Its practices are no different to any other index provider in China, of which there are many. We believe China wants to be part of the global market place and FXI has been facilitating this by bringing ChinaÆs markets to the world.ö
According to Paul Hoff, FTSE GroupÆs Asia-Pacific managing director, the provision of indices is also a significant business because of external demand from investors. ôThere is a large number of international investors that want to invest as qualified foreign institutional investors,ö he says. ôThe futures contract set up by the Singapore exchange is an excellent product for investors who want to access the market.ö
The launch of a suite of indices by MSCI Barra is further confirmation, if any were needed, that data providers are jostling to exploit commercial opportunities to license information to product providers and overseas exchanges.
The suite includes a composite index of China A and H shares and the MSCI Zhong Hua Composite Index, which combines the existing MSCI China, Hong Kong and China A indices.
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Actively managed funds were also not found to have better odds of higher returns than more passive funds.