* HKEx mainland China platform not operating yet
* To develop spot pricing benchmark to support mainland
* Also expected to develop warehousing and logistics network
(Adds detail, PIX)
By Melanie Burton
QIANHAI, China, May 11 The head of Hong Kong
Exchanges and Clearing (HKEx) said the bourse's
upcoming commodity platform in mainland China would support
futures trading at other Chinese exchanges.
The spot trading platform is expected to be used in metals
such as copper and nickel and is the HKEx's biggest attempt to
build a presence on the turf of China's home-grown futures
exchanges in Shanghai, Dalian and Shenzhen. It remains unclear
when it will begin operating.
"Our strategy is to (first) develop the physical market.
Without laying a solid foundation in the physical market, you
cannot build a good futures market," HKEx Chief Executive
Officer Charles Li said on Thursday.
He made the comment on a visit to the site of the upcoming
platform in Qianhai, just 50 km (30 miles) from Hong Kong, where
HKEx hopes to replicate the success of the London Metal Exchange
after buying that bourse around five years ago. The trip to
Qianhai was part of the LMEWeek Asia conference.
The aim is to develop a benchmark price in China that, like
its London counterpart, is tied to the physical market through
delivery, supported by a warehousing and logistics network.
Eventually, as China's markets open up, the Qianhai
platform, called the Qianhai Mercantile Exchange, is intended to
connect with the LME and potentially other mainland exchanges,
luring customers with opportunities to be active in both the
mainland's domestic markets and international markets.
Some industry insiders have said they are sceptical the new
exchange will offer anything they do not already have in a
market where investors are turning away from commodities in
favour of more tailored investment products.
Metals traders have also said that Qianhai is not enough of
an industrial metals hub to attract sufficient spot metal.
Meanwhile, the China Securities Regulatory Commission (CSRC)
warned last year that some regional exchanges were violating the
rules on spot trading.
The new platform would wait to launch until after Beijing
finished its clean up of the industry, Li said, without giving
further details on the time line to launch. "We are not in a
rush," he said.
Li also said the exchange was yet to make a final decision
on which commodities it would launch.
The head of the new platform, Xiaoli Guo, said that China's
industry needed to develop derivatives and clearing to help the
country's manufacturers manage their risk.
"The derivative market is not developed fully, so
standardised products cannot offer a tailored service for
different enterprises, particularly SMEs" he said, referring to
small and medium sized enterprises.
It also plans to develop and register a warehousing network
in China, just as the LME has in other markets.
"Warehousing capabilities are an important indicator for a
good physical market, so we need to have a large network with a
lot of warehouses available for the consumers," said Guo.
(Reporting by Melanie Burton; Writing by Joseph Radford;
Editing by Tom Hogue and Christian Schmollinger)