HKEx Announces Plans for Industrial User Base for China Metals Hub

Hong Kong Exchanges and Clearing is planning to develop an industrial user base to back its metals trading hub in China as part of a drive to expand its commodity business in the world's second largest economy.

This is an opportunity for HKEx to Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term its LME brand.

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A new free trade zone near Hong Kong, known as Qianhai, is set to host the platform for trading metals before extending into other commodities, pending regulatory approval, according to HKEx spokesman Scott Sapp.

Sapp commented: "Our goal is to leverage our experience in launching new initiatives with the mainland and the LME's (London Metal Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term) successful model to 'physicalize' the mainland's commodities market.”

HKEx bought the LME for $2.2 billion at the height of the commodities boom in 2012, and a mainland presence would be welcomed after a year-long struggle by the London bourse to break into China. HKEx Chief Executive Charles Li has previously said that plans by HKEx to create mainland, physically deliverable spot commodity markets are a way of getting the LME's warehousing expertise into China.

By the end of 2015, annual spot commodities trading volume had reached $4.5 trillion on more than 350 independent exchanges in China, according to data from Euromonitor. Trading volume grew 35 percent annually from 2011 to 2015.

However, regional commodities exchanges have no central regulator and many investors have walked away with their fingers burnt, leaving an opportunity for HKEx to leverage its LME brand.