Hong Kong Mercantile Exchange

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Hong Kong Mercantile Exchange
HKMex-Logo sm.gif
Founded 2008
Headquarters Hong Kong
Key People Barry Cheung, Chairman
Products U.S. dollar-denominated fuel-oil contracts
Website www.hkmerc.com

The Hong Kong Mercantile Exchange (HKMEx) was a commodities exchange launched on May 18, 2011 whose goal was to bridge the international commodities markets with China.[1][2]

The exchange announced on May 18, 2013 that it had voluntarily surrendered the authorization to provide automated trading services and was shutting down trading. It closed out all open positions on May 19 after the Hong Kong securities regulator announced it had discovered possible financial irregularities at the exchange and referred the matter to the police for investigation.[3] HKMEx said it would continue to operate as an organization with its existing staff. It will focus on developing new products including renminbi-denominated precious and base metals contracts designed to better meet customer needs, the exchange said.

The exchange offered gold and silver futures contracts, and had planned to launch additional contracts in base metals, as well as energy and agricultural products and commodity indices.[4]

HKMEx trades were executed on its Pearl platform, which ran on the TRADExpress platform from technology firm Cinnober.[5] The platform worked in conjunction with the Scila Surveillance system, produced by technology company Scila AB and marketed by Cinnober.[6] All trades are cleared through LCH.Clearnet.

Background

HKMEx debuted May 18, 2011, using technology firm Cinnober for trading, post-trade and surveillance functions.[7] The first product traded was a 32-troy-ounce gold futures contract in U.S. dollars with physical delivery in Hong Kong, according the the release. HKMEx trading hours are between 8 a.m. and 11 p.m., Hong Kong Time, allowing for trading with Europe and the U.S. products span precious metals and base metals, energy and agriculture products, and commodity indices.

HKMEx has been building up its ownership base gradually. In June 2010, En+ Group became a founding shareholder in the exchange, taking a 10 percent stake. En+ is a Russian-based development fund which invests in mining, metals and energy projects and holds a 47 percent stake in UC RUSAL, the world's largest aluminum and alumina producer listed on the Hong Kong Stock Exchange, as well as ownership of Russia power and ferromolybdenum, coal, uranium and nuclear companies.

In December 2009, Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)) became a founding shareholder in HKMEx. ICBC (Asia) acquired a 10 percent equity interest in HKMEx and agreed to participate extensively in the exchange’s operations as a trading member, clearing member and settlement bank.

ICBC (Asia) joined China Ocean Shipping (Group) Company, operator of China’s largest shipping container line, as a keystone investor.[8]

Reliance Money, a unit of India's Reliance Capital, announced in 2008 that it had bought a 15 percent stake in HKMEx.

The Hong Kong Exchanges and Clearing (HKEx) was not involved in the establishment of the HKMEx.[9]

As of 5pm on Feb. 13, 2012, trading on HKMEx’s gold and silver futures reached 1,003,210 contracts, representing total turnover of over US$50 billion (around HK$390 billion). [10] Trading on the exchange's US-dollar gold futures for the first time surpassed the 10,000 daily volume mark on June 4, 2012. [11]

Products and Services

HKMEx had planned an initial listing of U.S. dollar-denominated fuel-oil contracts, followed by other commodity contracts, including both agricultural and industrial, but later announced it would begin with gold futures instead. The fuel oil launch was delayed because of complications related to physical delivery in China, according to HKMEx's president.[12]

The potential energy contracts to be launched would include the crack spreads, or oil products' relative value to benchmark crude oil, which can be used as a hedging tool for margins, or profit levels of oil refiners.

HKMEx began trading gold, its first product, on May 18, 2011. This was followed by the launch of a 1,000 troy ounces silver futures contract on July 22, 2011.[13] The exchange said it also plans to launch gold and copper futures contracts denominated in renminbi. This will be followed by contracts in other precious and base metals, energy, agriculture, and commodity indicies, some of which will be financially settled.[11]

Key People

References

  1. Beyond Brics. FT.
  2. Press Release - Hong Kong Mercantile Exchange successfully launched: The world’s fastest commodity exchange now fully operational. HKMEx.
  3. Irregularities Suspected at Hong Kong Mercantile Exchange. The New York Times.
  4. Press Release: Hong Kong Mercantile Exchange Receives Trading Authorisation from Securities and Futures Commission. HKMEx.
  5. Press Release. Cinnober.
  6. Press Release. Cinnober.
  7. Press Release - Hong Kong Mercantile Exchange successfully launched: The world’s fastest commodity exchange now fully operational. HKMEx.
  8. INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED INVESTS IN HONG KONG MERCANTILE EXCHANGE. HKMEx.
  9. Hong Kong to launch fuel-oil futures trading. MarketWatch.
  10. Press Release: HKMEx Surpasses One Million Contract Mark. HKMEx.
  11. 11.0 11.1 Press Release: HKMEx Gold Trading Surpasses 10,000 Contracts. HKMEx.
  12. HongKong Exchange to launch gold futures. Reuters.
  13. Press Release: HKMEx to Begin Trading Silver Tomorrow. HKMEx.
  14. Hong Kong to launch commodities exchange. Associated Press.