Exchanges & Clearing () Is The World’s Biggest Exchange Operator

The Hong Kong Exchanges & Clearing (HKEx) is now the world’s biggest exchange operator after embarking on various stock trading programs to bring together traders in the Asian region.

At the center of these enterprises is the “link” plan with the Shanghai Futures Exchange (ShFE) that allowed mainland funds to purchase Hong Kong shares.

Experts believe that the stock market operator’s 65% shares increase this year could have been higher if it successfully linked industrial metal commodities with stock traders on the Mainland. But getting closer to Mainland expansion will continue to be arduous for HKEx as China remains firm in globalizing its commodity market without any help from other stock market operators.

“Implementing a ‘commodities connect’ is much trickier than with , since you are talking about a physical product with the need to be able to take delivery, as opposed to just a piece of paper,” said an analyst at Credit Suisse in Hong Kong.

What hinder the seamless linking with the 2 operators in Asia are the existing metal contracts on HKEx. Some traders also say that ShFE is not really open to this plan as it means altering many existing rulings inside its constraints.

Currently, HKEx is dealing with the aftermath of a slump in Hong Kong and Shanghai following the central government agency’s decision to sell down 2 major banking stocks.

Local equity strategists said the dumping of stocks was caused by the anxiety buoyed by speculations that and Hong Kong regulators might take “special measures” to cool overheated .

With a turnover of more than HK$5-B, HKEx was the most traded stock in Hong Kong before closing down 1.83% at HK$300.20.

Base Metals Market

HKEx says that bringing industrial metals to the Chinese market is a tough job since traders are not used to dealing with physical products such as , , and .

“Base metals are new to Hong Kong’s markets and new products often take time to develop so we are taking a long-term view with our Asia commodities contracts,” an HKEx official said.

The official also said that its immediate focus is on another stock trading link with Shenzhen, China.

The firm still has a lot of work to do to emulate and eventually surpass existing contracts on the London Metal Exchange ().

HKEx bought the LME for $2.2-B in Y 2012 to break the latter’s longstanding reliance on cash equities and give it more influence.

The LME remains the center of global base metal trading and the melting pot of both seasoned and upcoming industrial metals miners. Currently, more than 80% of global non-ferrous business is conducted on its market.

Currently, the LME is focused on its newly launched measures that include liquidation on single date per month and plans on offering a discount for trading big volumes.

Analysts say that LME volumes need new products to boost activity after falling by 6% in May.

Stay tuned…

Paul Ebeling

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