Ill-fated Hong Kong Mercantile Exchange simply could not compete
The exchange had to scrap its energy trading ambition and its foray into gold was a disaster
The scandal-shrouded closure of the short-lived Hong Kong Mercantile Exchange (HKMEx) raised questions about its governance and regulatory oversight, but the key to its demise was a simple inability to compete.
Chairman Barry Cheung Chun-yuen's grand plan for a new commodities exchange was unveiled at a mid-2008 press conference featuring a video of Financial Secretary John Tsang Chun-wah giving his blessing to the project.
Cheung's oil industry background, the promise of energy and commodities trading directly with the mainland and the clear support of the Hong Kong government - even though regulators had yet to grant the exchange a licence at the time of launch - gave the brokers who joined the HKMEx expectations of fast and furious trading, and profit.
Tsang's support was seen by analysts as an official endorsement of fresh competition in financial markets.
Hong Kong Exchanges and Clearing had monopoly status in stock trading, while the Chinese Gold and Silver Exchange Society had traded gold for more than 100 years in the city. The missing piece was an exchange to tap into rising mainland demand for commodities.
"We joined the HKMEx as its membership fee was low and we believed if it had a good turnover, participating made sense," said Ben Kwong Man-bun, chief operating officer of KGI Asia and one of the 37 broker members of the exchange.