The move brings the exchange one step closer to developing an electronic commodities exchange aimed at increasing Asia’s participation in the global market.
To launch the new trading platform, the first product offered will be a one kilo gold futures contract in US dollars with physical delivery in Hong Kong.
“We are very excited about this historic day. It allows us to establish a liquid and vibrant international commodities exchange based in Hong Kong, linking China with the rest of Asia and the world,” said Barry Cheung, chairman of HKMEx.
“Global demand for core commodities has in recent years been driven by Asia, especially China and India. However, market participants in the region have had to rely on Western exchanges for price discovery, bearing the basis risk exposure in the process.
“Our new platform will offer Asia a bigger say in setting global commodity prices. It will also enable market participants to more actively manage their risk exposures, using products tailored to Asian market needs” he added.
Trading hours will run between 0800 to 2300 Hong Kong Time to overlap with European and US commodity markets.
“This helps to promote cross-continent trading and boost liquidity,” explained Albert Helmig, president of HKMEx.
“It also offers participants extensive opportunities for hedging, arbitrage and effective risk management.”
This announcement comes after a month of increased activity on the major Asian exchanges, with almost 40m metals contracts changing hands during March across the continent.
This represents a 51% increase from the previous month’s trading, even with the Chinese government’s deliberate measures to cool commodity prices still in effect.
The exchange will begin trading with at least 16 members, including some of the world’s largest financial institutions and futures commission merchants as well as several well-established brokerages in Hong Kong.
Additional standardised products are also in the pipeline, including precious and base metals, energy, agriculture and commodity indices.
Furthermore, HKMEx believes it is also uniquely positioned to take advantage of the liberalisation of the renminbi in Hong Kong.
“China’s pilot scheme for the settlement of overseas direct investments in the Chinese currency has not only increased cross-border trade settlement and liquidity, but also created a strong demand for renminbi-denominated investment instruments,” said Helmig.
All transactions on HKMEx will be cleared through London-based LCH.Clearnet.
This story is
from Futures and Options Intelligence, to get daily news updates direct to your
inbox, sign
up to FOi