Hong Kong stock exchange Chief Executive Charles Li said on Tuesday the bourse was in official talks with Guangdong authorities on metals warehousing, a major step towards its long-held aim of expanding in mainland China.
Li, head of Hong Kong Exchanges and Clearing Ltd (HKEX), has long wished for a China warehousing foothold to boost its London Metal Exchange (LME) franchise, but has faced reluctance from Chinese regulators concerned with protecting emerging domestic exchanges in the world’s biggest consumer of metals.
“We have been talking about LME warehousing in China, it’s not going to be an easy subject,” said Li, speaking at an event in Hong Kong. “We are working with the Guangdong government (to see) if we can experiment a pilot scheme for warehousing.”
Warehouses are a critical part of the LME’s price-setting function because they act as a market of last resort; a place of storage for sellers in need; and a store of metal for buyers in a mechanism that roots exchange prices in the physical market.
The plan involving Guangdong, a province in southern China, would come under the country’s Greater Bay Area project, Li said. The project aims to better integrate the economies of Guangdong and Hong Kong, spurring growth in both regions.
The bourse still requires consent from regulators to go ahead with the pilot plan, Li added.
The exchange is also planning to expand products under its mainland spot physical exchange, the Qianhai Mercantile Exchange (QME), by adding aluminum ingots in the third quarter, followed by T-bar aluminum, and copper probably next year, Li added.
It will continue to look at cross-listing or clearing products from other commodity exchanges, he said.
In London, the LME will make a “very significant” multi-million dollar investment to modernize its options offerings towards screen-based trade from the telephone interbank market, London Metal Exchange Chief Executive Chamberlain said. He didn’t specify how much money LME would invest.
The telephone market supports LME volumes on the exchange’s ring, one of the world’s last open outcry trading floors.
“Our options (offering) was an interbank telephone trades market but the world is moving on,” Chamberlain said. - Reuters -