Shanghai Gold Exchange

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Shanghai Gold Exchange
Sge.jpg
Founded 2002
Headquarters Shanghai
Key People Wang Zhenying, President; Jiao Jinpu, Chairman
Products Gold, silver, platinum spot and forward
Website http://www.sge.sh

Shanghai Gold Exchange (SGE) is a non-profit self-regulatory organization, approved by the State Council, organized by the People's Bank of China, and registered with the State Administration for Industry & Commerce, for the purpose of trading gold, silver, platinum and other precious metals.[1]

The People's Bank of China gave approval to the exchange in mid-2007 to accept foreign banks as members. Foreign banks applying to be accepted as members of China's Shanghai Gold Exchange must be locally incorporated.[2]

Background

In March of 2008 the China Banking Regulatory Commission (CBRC) issued permits allowing Chinese commercial banks to trade gold futures on the Shanghai Futures Exchange (SHFE). Commercial banks are required to be members of the SGE and the SHFE before conducting gold futures trading through the SHFE. Moreover, banks must have a capital adequacy ratio of over eight percent, the CBRC announced.[3]

In May 2010, the exchange announced it was planning to offer gold exchange-traded funds (ETFs), driven in part by strong Chinese demand for gold. Gold demand in the first quarter of 2011 more than doubled, surpassing India as the largest market for gold coins and bars, according to the World Gold Council. [4]

Products and Services

The Shanghai Gold Exchange launched a gold trading platform with eleven yuan-denominated gold contracts on September 18, 2014.[5] The international board, as the platform is known, is in the city's free-trade zone, making it open to foreign investors.[6] [7] The contracts on the new exchange will be physically settled and will be traded between bullion banks, refiners, producers and trading houses.

Members of the Chinese Gold & Silver Exchange Society (CGSE) in Hong Kong began trading on the Shanghai Gold Exchange directly on July 10, 2015, expanding ways to access the bullion market in China. The move came shortly after China announced plans to establish a yuan-denominated price fix on gold, which could give the buyers in Asia more power over bullion trade.[8] The SGE said in June that it hoped to launch a yuan-denominated gold fix by the end of 2015.[9]

In April of 2016 China announced the launch of a new renminbi-denominated contract on the Shanghai Gold Exchange to set a benchmark price for gold bullion. The move was part of efforts to increase the country's influence in the pricing of the precious metal. The gold fix price was set at 257.97 yuan (US$39.83) per gram. Eighteen banks and bullion traders were chosen as initial market makers, including 10 Chinese lenders, Standard Chartered Bank, Australia and New Zealand Banking Group and six domestic and international bullion traders including Switzerland-based MKS Gold Ltd, the exchange said.[10] The benchmark will compete with the centuries-old London gold fix, which is now set via an electronic auction system.[11]

The exchange had planned to launch a two-way chase settled platinum contract in 2019 but had to delay the plans because it failed to gain political clearance. A platinum contract in China would have given carmakers in the world’s largest auto market the ability to hedge the platinum they use in their catalytic converters and enables investors to speculate on platinum prices. Currently, exchange users can buy physical platinum from the exchange but they can't sell it back.[12]

On September 12, CME Group announced that it would launch two new gold futures contracts on October 14, 2019, based on the SGE Shanghai Gold Benchmark PM Price. CME Group will be using the EBS CNH Benchmark – 3pm Beijing for USD conversion. Both contracts will be listed on the COMEX. Additionally, SGE will launch new T+N contracts – NYAuTN contracts on October 14, 2019. NYAuTN contracts are linked to COMEX Gold Futures Asia Spot Prices and denominated in CNY. The contract sizes will be 100 grams.

Key People

  • Wang Zhenying, President
  • Jiao Jinpu, Chairman

References

  1. Welcome to SGE. SGE.
  2. Shanghai Gold Exchange Wants Foreign Members Incorporated in China. MarketWatch.
  3. Chinese Regulator Authorizes Commercial Banks to Trade Gold Futures. Resource Investor.
  4. Shanghai Gold Exchange Planning to Start ETFs, Chairman Wang Zhe Says. Bloomberg.
  5. China opens gold market to foreigners, seeks more pricing power. People Daily.
  6. China set to win Asia gold. Reuters.
  7. Gold trading to open up to foreigners in Shanghai. South China Morning Post.
  8. Hong Kong gold exchange members launch direct trade in Shanghai gold. The Economic Times.
  9. London's domination of precious metal benchmarks at risk. Reuters.
  10. China to launch gold benchmark. ShanghaiDaily.com.
  11. China launches renminbi-denominated gold benchmark. The Financial Times.
  12. Opponents squash platinum plans of Shanghai Gold Exchange. The Financial Times.