The Hong Kong Mercantile Exchange (HKMEx) has announced that it has received authorisation from the Securities and Futures Commission (SFC) to operate as an automated trading services (ATS) provider and will have a trading debut on May 18, 2011.
The ATS authorisation grants HKMEx the right to offer market participants, through its member firms, the use of its state-of-the-art electronic platform to trade commodities. The Exchange will begin trading with at least 16 members including some of the worlds largest financial institutions and futures commission merchants as well as several well-established brokerages 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, says Barry Cheung, chairman at 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.
The first product to trade on the Exchange will be a 1-kilo gold futures contract offered in US dollars with physical delivery in Hong Kong.
Trading hours will run between 0800 to 2300 Hong Kong Time, overlapping commodity markets in Europe and the US.
This helps to promote cross-continent trading and boost liquidity, says Albert Helmig, President at HKMEx. It also offers participants extensive opportunities for hedging, arbitrage and effective risk management.
In the pipeline are standardised products which will either be physically or financially settled, covering precious and base metals, energy, agriculture and commodity indices.
HKMEx is uniquely positioned to take advantage of the liberalisation of the renminbi in Hong Kong.
Chinas 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, says Helmig.
All transactions on HKMEx will be cleared through London-based LCH.Clearnet, an independent clearing house serving major international exchanges.
(LB)