* Plans to launch monthly metals contracts in Hong Kong
* HKEx eyes cross-listing SHfE metals contracts
* Future of LME's ring to be debated in 2014
(Adds more comments from Li, details on HK plans for RMB trade)
By Melanie Burton
SINGAPORE, Dec 4 The Hong Kong bourse plans to
build up its commodity business by co-listing global benchmarks
in metals and other products and matching them with key
contracts traded on China's exchanges, its CEO said.
By hosting both Chinese and global benchmark contracts, the
Hong Kong Exchanges and Clearing Ltd (HKEx) aims to
tap opportunities from arbitrage trade and the growing
acceptance of China's renminbi currency internationally.
HKEx plans to launch monthly, cash-settled futures contracts
based on its suite of London Metal Exchange (LME) contracts, in
the second half of 2014, Charles Li told Reuters. The exchange
bought the LME for an eye-popping $2.2 billion last year.
"Hong Kong traditionally is not a fertile ground for
commodities," Li said in an interview on Wednesday.
"But the LME allows us to build a greater global leadership
in base metals...and use that as a catalyst for us to broaden
into a comprehensive commodity-based platform, by trying to
create a meeting ground of products."
Working with China exchanges such as Shanghai Futures
Exchange (ShFE), China's top exchange for base metals and the
LME's closest competitor, HKEx also aims to cross-list contracts
such as industrial metals, iron ore and thermal coal, Li said.
Dual-listed products would be cash settled but based on the
contract's home settlement prices, he said. For China-based
contracts with no international equivalents, HKEx would consider
developing its own.
China's first iron ore futures launched on the Dalian
Commodity Exchange in October and its first thermal coal futures
contract debuted on the Zhengzhou Commodity Exchange in late
New products, in particular yuan denominated, would boost
renminbi volumes traded on the exchange as the currency takes
steps towards convertibility, a key part of the HKEx's growth
strategy, and from which it can develop new products, said Li.
HKEx signed an agreement with Singapore Exchange on
Wednesday to work together to promote the internationalisation
of the renminbi, explore joint product development and
collaborate on issues to do with technology and regulation.
BROADENING COMMODITIES' APPEAL
The Hong Kong bourse, which before its LME purchase last
year was an equities exchange only, is also tapping its existing
membership to widen the audience for new commodities products.
Some, like iron ore and thermal coal, are planned for launch
under an HKEx banner, rather than as an LME contract, Li said.
New launches of London-based products must wait until after
September, when the exchange's new inhouse clearing system
launches, Li said, but Hong Kong based, cash-settled products
such as a yuan-based copper contract or mini contracts, could be
launched before then.
The departure last month of global broker Jefferies from the
LME's historic open outcry ring has raised questions about
whether the ring, Europe's last, can keep pace with current
But Li said that ring dealing volumes, although small at
5-9 percent of the exchange's base metals volumes, were
important because they feed the benchmark. The issue would be
examined in 2014, he said.
"The members need the exchange to generate (the benchmark),
so you live with it. But as the exchange owner, you obviously
look at the broader industry... and your own economics."
(Editing by Michael Urquhart and Muralikumar Anantharaman)