HKEx board plans LME strategy

Top exchange officials are in London to work out how to boost commodities trading at home

PUBLISHED : Wednesday, 09 October, 2013, 12:00am
UPDATED : Wednesday, 09 October, 2013, 5:15am

Hong Kong Exchanges and Clearing's board will meet in London today to map out future strategies for the London Metal Exchange after coming under intense criticism for failing to promote commodities trading in Hong Kong.

HKEx bought the LME, the world's largest metal exchange, for £1.39 billion (HK$17.31 billion) in December to diversify its business with commodities trading in the face of lower stock-market turnover and fewer new listings.

"The board of directors will definitely work on ways to help HKEx and the LME to work more closely and to seek ways to promote commodities trading in Hong Kong," an exchange source said. "HKEx will introduce more new products and services to achieve that goal."

The source said all 13 directors had gathered in London to attend the annual LME Week and meet metal traders and newly appointed LME chief executive Garry Jones.

Jones said on Monday that the LME would not move from London, but would develop business there and in Hong Kong.

While buying the LME has boosted HKEx's profits, the deal has failed to achieve the government's bigger mission of developing commodities trading in Hong Kong. Six years ago, the government urged HKEx to study the launch of oil and gold futures. It agreed to launch gold futures in 2008, but that has been a failure, with no turnover this year.

After HKEx declined to go into oil futures, the government helped set up the Hong Kong Mercantile Exchange (HKMEx), which traded gold and silver futures. That experiment also failed, with HKMEx collapsing after two years of thin trading.

A government source said it would like to see HKEx's takeover of the LME boost commodities trading in Hong Kong. The government is HKEx's single biggest shareholder and appoints six of its 13 board members.

"Many Chinese companies have the need to do hedging for metal commodities as the country is the world's biggest metal consumer," he said.

Christopher Cheung Wah-fung, legislator for the financial services sector, said HKEx should let some LME products be traded in Hong Kong, and make it easier for Hong Kong-based brokers to become members of the LME.

"But so far, we have not seen the HKEx do anything in the 10 months since buying the LME," he said. "No products launched; no Hong Kong brokers joining the LME."

Hong Kong Securities Association chairman Jeffrey Chan said HKEx had done nothing to link up the two bourses.

"There are some Hong Kong brokers trading for their mainland clients at the LME, but they built up the relationship themselves instead of getting any help from HKEx," he said.