UAE’s leading derivatives borse, the Dubai Gold and Commodities Exchange (DGCX), says that it has obtained a licence from the Shanghai Gold Exchange (SGE) to list a contract known as the ‘DGCX Shanghai Gold Futures’.
DGCX and the SGE signed the licensing agreement at a ceremony dubbed ‘Dubai Week in China’, in the presence of key government officials including Secretary of the UAE Ministry of Economy for Foreign Trade and Industry Affairs.
At the signing ceremony for the licensing agreement, Gaurang Desai, CEO of DGCX, noted that the new contract will be the first yuan-denominated gold future product to be traded and cleared outside of China while its pricing mechanism will be based on the Shanghai Gold Benchmark Price.
ABC joins as market maker
The DGCX also announced on the same day that the Agricultural Bank of China (ABC) DIFC Branch was appointed as the first market maker for the new contract. ABC Limited, also known as AgBank or Nóngháng, is China’s third-largest bank by deposit base and fourth-largest by assets and loans outstanding. It was founded in 1951, and was one of the first participants in the precious metal business in China.
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The agreement signed by both parties provides a framework to bring the needed liquidity to the marketplace. This will ensure a strong start to trading and enhance demand already seen from investors. ABC’s involvement in the process will come through offering bid and ask prices with a minimum spread and maximum size, and maintain margins and collaterals.
DGCX has seen its volumes spike this year with year-to-date volumes until the end of September up 40 percent compared to the same period last year, crossing over 14.76 million contracts, as Finance Magnates reported earlier this month. Its Indian rupee currency and gold contract witnessed brisk trading and were its top performing products in 2016.
Gaurang Desai, CEO of DGCX, commented: “We have been greatly involved with key players in the Chinese derivatives marketplace over the past few years, and are looking to strengthen these links even more. Associating ourselves with such dynamic markets takes us a step further along the path of substantial growth and expansion, both regionally and internationally.”
Mr. Jiao Jinpu, Chairman of SGE, added: “Dubai, as “City of Gold”, is not only one of the most important gold trading center in the world, but also an important node in OBOR initiative. The collaboration between Shanghai Gold Exchange and Dubai Gold and Commodities Exchange (DGCX) is ‘world first’ usage of “Shanghai Gold Benchmark Price” in the international financial markets.”
“DGCX Shanghai Gold Futures Contract, which settles on the “Shanghai Gold Benchmark Price”, is the foremost RMB denominated gold futures contract launched offshore . The cooperation between the two exchanges will contribute to the exchange of resources between the two financial markets, enhance the influence of the two places in the global gold market, and jointly build the bond connecting the East and West gold markets,” he added.