London Metal Exchange to reboot its cross-border trading channel with Hong Kong, extend trading to Asian market hours
- Plan will involve three stages, with first being rollout of US dollar mini contracts for aluminium, zinc, copper, lead, nickel and tin by HKEX
- In long term, London and Hong Kong will establish cross-border investment channel similar to Stock Connect programmes with Shanghai and Shenzhen
London Metal Exchange, the world's largest financial market place for base metal futures, plans to reboot its cross-border trading channel with Hong Kong in a three-stage approach to increase transactions during Asian market hours.
The first stage, scheduled for the end of 2019, will involve the LME’s parent Hong Kong Exchanges and Clearing Limited (HKEX) rolling out six US dollar-denominated contracts for aluminium, zinc, copper, lead, nickel and tin, said the London bourse’s chief executive Matthew Chamberlain. These “mini” contracts, comprising 5 tonnes of metals per contract compared with 25 tonnes in London, will use London’s pricing as reference, while they are settled in Hong Kong.
“Traders have shown a great deal of interest to trade LME products in the Asian time zone,” Chamberlain said last week. “The six US dollar mini contracts to be launched will be the debut of a London-Hong Kong commodities connect.”
The second stage of the reboot will allow traders to transfer their open interests from Hong Kong to London after Asian trading hours, extending the time for traders to close their long or short positions to better hedge risk. No timetable has been set for this second stage.