Volume light as gold contract trades go online

PUBLISHED : Saturday, 29 March, 2008, 12:00am
UPDATED : Saturday, 29 March, 2008, 12:00am

Only about 1,000 contracts traded during the soft launch yesterday of the electronic trading system for London gold contracts at the Chinese Gold & Silver Exchange Society.

The system, which cost HK$12 million to install, marked a breakthrough, allowing online US dollar gold contracts to trade.

For the past 98 years, the exchange had only allowed traders to use the traditional open outcry - using hand gestures and shouting the prices - to deal tael gold in the Sheung Wan trading hall.

Gold trading firms wanting to join the electronic system must each pay the exchange HK$200,000 and their traders must sit for a test.

They can use computers in their offices or send traders to use the computer room at the exchange to trade US dollar London gold contracts, denominated in 10 ounces or in 100 ounces, from 8am to 3.30am.

The exchange did not release turnover figures, but traders said only about 1,000 contracts had been traded by 8pm yesterday. They said turnover was low because only 17 firms, or 10 per cent of the 171 exchange members, including Taifook Group and Grand Finance Group, joined the soft launch.

'The electronic system worked well but only a small turnover was recorded. Our firm did not do anything on the first day, as we wanted to wait and see how the market moved,' said Sze Chong-hoi, a director of bullion and foreign exchange at Taifook.

'I think it will be hard to create any high turnover with only 17 members joining the electronic trading at this stage. I think the turnover will increase when more members join.'

William Lee Tak-lun, the president of the society, said he expected a quiet debut.

'This is just a soft launch and we expect more firms to join when we officially launch the system in the next few months,' he said.

Mr Lee said that within the next few months, the exchange would promote the new system to inves- tors and encourage investors to trade gold contracts through its members.

Investors trade London gold with brokers or banks, but Mr Lee said exchange trading would add transparency to the market.

'This is a milestone for the exchange as, with the electronic trading system, the exchange has had three major developments. It added electronic trading to the open-outcry method, extended trading hours from six to 19? hours, and expanded local tael gold to London gold,' he said.

'Gold trading has been popular recently so the timing is right for this new electronic trading and the London gold contracts.'

Yesterday, the first contract traded at US$950 an ounce, in line with global market prices.

Lacklustre launch

The number of contracts dealt through the electronic system yesterday: 1,000