New commodities trading venue The Hong Kong Mercantile Exchange (HKMEx) has received authorisation from the Securities and Futures Commission to operate as an automated trading services (ATS) provider.
On 18 May, HKMEx 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.
“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,” said Barry Cheung, chairman of HKMEx.
HKMEx's broking members at launch include BOCI Securities, Celestial Commodities, CES Capital International, Chief Commodities, ICBC International Futures, Interactive Brokers, KGI Futures (Hong Kong), MF Global Hong Kong, Morgan Stanley Hong Kong Securities, OSK Futures Hong Kong, Phillip Commodities (HK), Tanrich Futures and TG Securities. Its three clearing members are UK-based Interactive Brokers, MF Global UK and Morgan Stanley.
The first product to trade on the exchange will be a one kilo gold futures contract offered in US dollars with physical delivery in Hong Kong. Trading will run between 8.00-23.00 local time to overlap with markets in Europe and the US. “This helps to promote cross-continent trading and boost liquidity,” said Albert Helmig, president of HKMEx. “It also offers participants extensive opportunities for hedging, arbitrage and effective risk management.”
The exchange is expected to roll out a series of standardised products which will either be physically or financially settled, covering precious and base metals, energy, agriculture and commodity indices.
HKMEx is also positioning itself 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, the central counterparty serving several international exchanges.