FTSE Xinhua And Shanghai Stock Exchange: Case Over A50 Stock Index Futures Ruled

Concerning the case of dispute over FTSE Xinhua securities information contract filed by the plaintiff SSE InfoNet Ltd. (SSE InfoNet) against the defendant FTSE Xinhua Index Ltd. (FTSE Xinhua), the Shanghai Pudong New Area People's Court (the Court) rendered the verdict of the first instance yesterday (October 31). The Court ruled that the "License Contract on Securities Information" (the Contract) and the attachment signed between SSE InfoNet and FTSE Xinhua should be terminated on September 4, 2006; FTSE Xinhua shall pay a penalty of USD20, 000 to SSE InfoNet within 10 days after the judgment takes effect.

The Court accepted the case on August 23, 2006 and then, according to the legal general procedure, formed a collegiate bench to sit in the public hearing of the case on October 11, 2006. During the pleading process, the Court accepted a counterclaim filed by the defendant FTSE Xinhua and had the amalgamated adjudication.

After the hearing, the Court held that both the Contract and the attachment, signed by the plaintiff and the defendant, reveal the true intentions of both parties. Therefore, the Contract is effective and both parties should fulfill overall and objective performance of the agreement. The plaintiff has provided the defendant with SSE securities information, i.e. the real-time stock quotes. The defendant should also scrupulously abide by the obligations stipulated in the Contract. The Article 5 of the agreement stipulates that, without the plaintiff's written permission, the defendant cannot permanently store or use the SSE securities information. Moreover, the article provides explicit interpretation of the meaning of "use": "including but not limited to copying, spreading, editing, transferring, licensing others to use and developing derivative products". Thus, without authorization, the defendant cannot use the SSE's real-time stock quotes provided by the plaintiff to develop any derivative products.

In the Courts' opinion, substantially, the defendant's action of developing and listing the China A50 Index is using the real-time SSE stock quotes provided by the plaintiff to develop a derivative product. Obviously, such action violated the stipulation of the Contract.

Therefore, according to relevant articles of the "Contract Law", the Court ruled as follows:

1. the Contract and the attachment signed between the plaintiff SSE InfoNet and the defendant FTSE Xinhua on December 29, 2005, shall be terminated on September 4, 2006;
2. the defendant FTSE Xinhua shall pay a penalty of US$20,000 to the plaintiff SSE InfoNet within 10 days after the judgment takes effect;
3. the claim by the plaintiff SSE InfoNet for the defendant's assumption of the counsel fees incurred in the case shall be rejected;
4. claims by the plaintiff FTSE Xinhua in the counterclaim shall be rejected.

The defendant (the plaintiff in the counterclaim) shall assume the original case acceptance fee of RMB4, 710 and the counterclaim acceptance fee of RMB2, 910.