Singapore 05/09/2016 - The Shenzhen government will take a minority stake in the spot commodity platform championed by the Hong Kong Exchanges & Clearing (HKEX), which continues to advance ahead of its launch in May next year.
The government of the city in Guangdong province will take a small shareholding in the project, which may still be open to participation by other players in China, though HKEX will remain the controlling shareholder, Charles Li, chief executive of HKEX, told delegates at the FT Commodities Asia Summit here on Monday.
HKEX - the parent company of the London Metal Exchange (LME) - is in active discussions with major foreign and domestic warehousing companies that have sheds in China. The warehouses are likely to be located in southern China and in Guangdong, Li said.
"Serious warehouse negotiation, rule engagement and signing up and onboarding will begin after the fourth quarter," Li said last month.
By end of the year, there should be a 100 people working at the project in Qianhai and probably 130-140 at the time of its launch, he added.
The platform, which will mirror the LME's model, is expected to start operations before LME Week Asia next year. The event typically takes place at the start of summer.
On the specifications for the base metal contracts to be traded on the platform, Li said it is still too early to announce details while it focuses on readying the platform's system, trading rules and testing.
But the contracts are likely to be smaller than LME contract tonnages given the "fragmented market in China", he said.
The platform would start with the trading of major base metal products while thereafter HKEX envisions a gradual expansion to other product categories. Ferrous metals are the next likely candidate although soft commodities and energy products are also possible the future, Li added.
In HKEX' 2016-2018 strategic report, published in January, it said it is exploring the development of a China mainland spot commodity trading and financing platform capable of 'physicalising' mainland market benchmarks.
(Editing by Mark Shaw)