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HKEx Launches First Asian Commodities Contracts

by Mary Swire, Lowtax.net, Hong Kong
24 April, 2014

Hong Kong Exchanges and Clearing Limited (HKEx) has announced that it plans to launch its commodities business with four futures contracts that will be traded in its derivatives market in Hong Kong.

HKEx aims to introduce the contracts – London Aluminium Mini Futures, London Zinc Mini Futures, London Copper Mini Futures and API 8 Thermal Coal Futures – later this year, pending regulatory approval and market readiness.

"The rationale behind our Asia Commodities platform is to meet the needs of the industry here in Asia, and provide currency convenience through contracts in renminbi (RMB)," said HKEx Chief Executive Charles Li. "The interest in this year's LME Week Asia showed how important Asia is to the global commodities business. This is just the beginning of our Asia Commodities plan."

London Metal Mini Futures in aluminium, zinc and copper will be traded in RMB, with contract size of five tonnes each. Their final settlement prices will be determined and published by the London Metal Exchange (LME), and their contracts will cover the current and the next 11 calendar months.

Large versions of the metals contracts are the LME's top three contracts by turnover volume and value. In the first quarter of this year, their volume accounted for more than 80 per cent of the LME's futures volume.

In addition, the energy and commodity publisher, Argus, and the business information provider, HIS, are licensing the API 8 coal index to HKEx for listing of the API 8 Thermal Coal Futures. The index tracks the price for coal delivered to south China, and is part of a series of indices used for international physical and derivatives coal business.

The API 8 Thermal Coal Futures Contract will trade in USD, with a contract size of 200 tonnes. The contract will cover the current and the next 23 calendar months.

HKEx has pointed out that, in Mainland China, around 70 percent of electricity comes from coal-fired power plants. The Mainland is among the largest producers, consumers and importers of thermal coal, with the other largest consumers including Japan, India, South Korea and Taiwan.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp

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