Chinese bank interested in LME trading

Bank of China International (BOCI) is on track to become the first Chinese member of the London Metal Exchange – giving the bourse a boost while it is considering possible takeover bids – following authorisation by the UK financial regulator.

The addition of a Chinese member to the world’s biggest metals market is expected to increase trading volumes, which would increase the LME’s attraction as a takeover target. China is by far the world’s largest consumer of metals and other industrial raw materials.

The 130-year-old metals bourse said on Friday it had received a “good number” of first-round bids ahead of an LME board meeting on Feb. 23.

BOCI, the investment banking subsidiary of the Bank of China Ltd , one of the country’s top four banks, has gained approval by the UK Financial Services Authority for its global commodities unit in recent weeks, according to the FSA Register.

FSA authorisation is a necessary step for BOCI’s application for category two LME membership, which would give it access to all types of exchange business except ring trading.

The bank still needs approvals by the LME and Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e Read this Term LCH.Clearnet and also must purchase LME shares before it can begin trading. For brokerage houses in London, the benefits of an enlarged market are likely to outweigh any market share lost to the newcomer.

BOCI is likely to be the only Chinese bank to get LME membership in the near future since it is the most assertive of China’s four state banks and is ahead of its peers in building up a commodities trading business, analysts have said. BOCI plans to kick off an iron ore Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term business this year in a bid to tap growing demand for hedging from Chinese steel mills.

Chinese firms can trade locally on the four commodity exchanges.

Forexmagnates team carried out a detailed study on FX in China available in the latest quarterly report.