London 21/10/2015 - The London Metal Exchange said on Tuesday has signed a memorandum of understanding (MoU) to develop a trading link between Hong Kong Futures Exchange Limited (HKFE) and itself, as well as a clearing link between HKFE Clearing Corporation Limited and LME Clear, to be named London-Hong Kong Connect.
The MOU was signed as part of cooperation initiatives in a ceremony led by Chinese President Xi Jinping, here in the UK on a state visit, and British Prime Minister David Cameron, the LME said in a release
HKFE, HKFE Clearing Corporation Limited (HKCC), the LME and LME Clear Limited (LME Clear) are all subsidiaries of Hong Kong Exchanges and Clearing Limited (HKEx).
“This is another step in the development of the HKEx Group. Our link will be an important bridge between Hong Kong and London, two of the world’s leading financial centres. Intermediaries and investors in Hong Kong will be able to have fast, stable and low cost access to the LME,” said Sir C K Chow, Chairman of HKEx.
If implemented, the link will enable HKFE’s eligible exchange participants to trade LME products, and HKCC’s eligible clearing participants to clear those trades. Development is at a preliminary stage and further work needs to be done to arrive at appropriate trading and clearing arrangements, the statement said.
Implementation is subject to regulatory approval in Hong Kong, the UK and the European Union. No formal agreement has been reached, and HKFE, HKCC, LME and LME Clear will discuss the types of products, the operational model, system requirements and related issues with regulators.
“Enhanced market access is a key component of our strategy. This link aims to expand the potential investor base of the LME market, give the LME a new presence in Asia, where it has many opportunities, and support the development of Hong Kong as a commodities trading centre,” said Charles Li, Chief Executive of HKEx.
This is the second initiative the LME has signed up to today. Earlier, the exchange and LME Clear signed a memorandum of understanding (MoU) with several Chinese and UK financial institutions in support of China's 'The Belt and Road' initiative.
In this, the parties intend to utilise risk management and funding along trading routes to give Chinese participants greater access to the global commodities markets. As well, they plan to boost internationalisation of the renminbi (RMB) by building on facilities such as LME Clear's recently launched RMB collateral service.
Chinese companies are becoming increasingly influential on the LME, the world's largest non-ferrous metals market, since December 2012, when it was taken over by Hong Kong Exchanges and Clearing Ltd (HKEx) for 1.388 billion pounds.
GF Financial Markets is a LME ring-dealer member (RDM). Bank of China International, China Merchants Securities and ICBC Standard Bank are all associate broker clearer members (ABCMs) - firms that do not trade on the open-outcry floor.
(Editing by Tom Jennemann)