Hong Kong Mercantile Exchange
Encyclopedia
Hong Kong Mercantile Exchange (Chinese: 香港商品交易所; abbreviated as HKMEx) is a new electronic commodities exchange
established in Hong Kong
for the trading of commodity futures
, options and other financial derivatives
. The exchange provides standardised, cleared, and exchange-traded products on a transparent pricing platform to the Asia-Pacific time zone. The purpose is to eliminate market liquidity risk
s associated with Asian market participants trading in faraway commodities exchanges such as New York and London. The exchange serves commodities investors, consumers and producers for arbitrage
and hedging
purposes. It formally began trading on May 18, 2011.
All transactions on the exchange are cleared through LCH.Clearnet
. The exchange positions itself as a trading forum located in Hong Kong - a jurisdiction entirely open to the free movement of capital and market participation by non-domiciled investors, while at the same time offering international market participants access to the booming mainland Chinese commodities market. This is accomplished through transparent price discovery
of China-bound commodities
.
The exchange's headquarters are at Cyberport
. Occupying over 47,000 sq ft, the office houses all of the Exchange’s core and support functions.
Chun-wah who said there is “a huge opportunity for Hong Kong to develop a commodities futures market” in Hong Kong. In March 2009, HKMEx appointed Albert Helmig, a former Vice Chairman of NYMEX, as President of the exchange to lead day-to-day operations of the bourse.
In June 2009, HKMEX and LCH.Clearnet agreed initial terms for LCH.Clearnet to provide clearing for the exchange. In September, HKMEx signed a contract with Hong Kong International Airport
to use HKIA’s Precious Metals Depository as a licensed storage venue for gold traded on the exchange.
In December 2009, ICBC (Asia)
acquired a 10% equity stake in the company, and said it intends to participate extensively in the exchange's operations as a trading and clearing member, as well as a settlement bank. This was followed by a June 2010 announcement that En+ Group
, owned by Russia's Oleg Deripaska
, had also purchased a 10% equity interest.
On May 18, 2011, HKMEx formally began trading with a US Dollar gold futures contract. In an interview with Reuters, Helmig said it plans to launch gold and silver futures contracts denominated in renminbi. He also said HKMEx will follow precious metals products with contracts in base metals, and then energy and agriculture. On July 22, 2011, the exchange launched a second product, a US Dollar silver futures contract.
running from 07:30 HKT to 08:00 HKT. Daily and final settlement take place at 23:30 HKT. The long trading day is designed to overlap trading hours in European and North American markets to improve liquidity and boost the opportunity for cross-market arbitrage.
to minimise trading disruptions due to unforeseen circumstances. The data centers also utilize fully redundant blade server
technology connected by both a primary and a secondary network
. Access to the infrastructure is fully secured.
The exchange’s electronic trading platform is called Pearl and is designed to provide a highly available trading platform. It also allows HKMEx to handle high liquidity and trading volumes on a secure and scalable high-end platform, while also allowing rapid introduction of new contracts, services and types of trading.
Pearl continuously provides:
HKMEx's Pearl supports the industry-standard FIX 4.4 protocol for market access, as well as EMAPI, a proprietary API which provides speed and efficiency advantages. In addition, HKMEx can provide a trading front-end called Pearl Plus.
HKMEx is backed by a growing list of top-tier technology partners.
Clearing Member
Broking Member
Proprietary Trader Member
HKMEx has 23 members.
Commodities exchange
A commodities exchange is an exchange where various commodities and derivatives products are traded. Most commodity markets across the world trade in agricultural products and other raw materials and contracts based on them...
established in Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
for the trading of commodity futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
, options and other financial derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
. The exchange provides standardised, cleared, and exchange-traded products on a transparent pricing platform to the Asia-Pacific time zone. The purpose is to eliminate market liquidity risk
Liquidity risk
In finance, liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss .-Types of Liquidity Risk:...
s associated with Asian market participants trading in faraway commodities exchanges such as New York and London. The exchange serves commodities investors, consumers and producers for arbitrage
Arbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
and hedging
Hedge (finance)
A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of...
purposes. It formally began trading on May 18, 2011.
All transactions on the exchange are cleared through LCH.Clearnet
LCH.Clearnet
LCH.Clearnet is an independent clearing house based in Europe that serves major international exchanges and platforms, as well as a range of OTC markets...
. The exchange positions itself as a trading forum located in Hong Kong - a jurisdiction entirely open to the free movement of capital and market participation by non-domiciled investors, while at the same time offering international market participants access to the booming mainland Chinese commodities market. This is accomplished through transparent price discovery
Price discovery
The price discovery process is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers ....
of China-bound commodities
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
.
The exchange's headquarters are at Cyberport
Cyberport
Cyberport is a creative digital community with a cluster of technology and digital content tenants. It is owned and managed by Hong Kong Cyberport Management Company Limited which is wholly owned by the Hong Kong SAR Government...
. Occupying over 47,000 sq ft, the office houses all of the Exchange’s core and support functions.
History
The exchange was announced at a Hong Kong press conference on June 25, 2008 by Chairman Barry Cheung Chun-yuen. In attendance was Hong Kong Financial Secretary John TsangJohn Tsang
John Tsang Chun-wah , GBM, JP, is the current Financial Secretary of Hong Kong. His responsibility is to assist the Chief Executive of Hong Kong in overseeing policy formulation and implementation in financial, monetary, economic, trade and employment matters. He exercises control over the...
Chun-wah who said there is “a huge opportunity for Hong Kong to develop a commodities futures market” in Hong Kong. In March 2009, HKMEx appointed Albert Helmig, a former Vice Chairman of NYMEX, as President of the exchange to lead day-to-day operations of the bourse.
In June 2009, HKMEX and LCH.Clearnet agreed initial terms for LCH.Clearnet to provide clearing for the exchange. In September, HKMEx signed a contract with Hong Kong International Airport
Hong Kong International Airport
Hong Kong International Airport is the main airport in Hong Kong. It is colloquially known as Chek Lap Kok Airport , being built on the island of Chek Lap Kok by land reclamation, and also to distinguish it from its predecessor, the closed Kai Tak Airport.The airport opened for commercial...
to use HKIA’s Precious Metals Depository as a licensed storage venue for gold traded on the exchange.
In December 2009, ICBC (Asia)
Industrial and Commercial Bank of China (Asia)
The Industrial and Commercial Bank of China , or more commonly known as ICBC is a licensed bank incorporated in Hong Kong...
acquired a 10% equity stake in the company, and said it intends to participate extensively in the exchange's operations as a trading and clearing member, as well as a settlement bank. This was followed by a June 2010 announcement that En+ Group
En+ Group
En+ Group is an energy-related company owned by Oleg Deripaska. En+ Group owns a controlling interest in United Company RUSAL. It reported revenues of $10.869 billion in 2006.-Operations:...
, owned by Russia's Oleg Deripaska
Oleg Deripaska
Oleg Vladimirovich Deripaska is the Russian Chief executive officer of Basic Element company and a member of the Board of Directors and CEO of United Company RUSAL, a Russian aluminium industry company...
, had also purchased a 10% equity interest.
On May 18, 2011, HKMEx formally began trading with a US Dollar gold futures contract. In an interview with Reuters, Helmig said it plans to launch gold and silver futures contracts denominated in renminbi. He also said HKMEx will follow precious metals products with contracts in base metals, and then energy and agriculture. On July 22, 2011, the exchange launched a second product, a US Dollar silver futures contract.
Hours
The exchange's trading days begin at 08:00 Hong Kong Time and end at 23:00 HKT, with an opening auctionAuction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
running from 07:30 HKT to 08:00 HKT. Daily and final settlement take place at 23:30 HKT. The long trading day is designed to overlap trading hours in European and North American markets to improve liquidity and boost the opportunity for cross-market arbitrage.
Gold
HKMEx's gold futures contract is in 32-troy ounce (1-kilogram) bar units and priced in US dollars per troy ounce. There is be one contract per board lot. Futures contracts are offered for expiry in the current calendar month, the next two consecutive calendar months, and any even months falling within a 12-month period starting with the current month. The contract will be physically delivered in Hong Kong.Silver
HKMEx's US Dollar silver futures contract trades in units of 1,000 troy ounces with physical delivery in Hong Kong. Contracts are for the current calendar month, the next two consecutive months, and any months of January, March, May, July, September, and December within the succeeding 12-month period.Technology
HKMEx’s technology infrastructure is deployed across two geographically dispersed data centersData center
A data center is a facility used to house computer systems and associated components, such as telecommunications and storage systems...
to minimise trading disruptions due to unforeseen circumstances. The data centers also utilize fully redundant blade server
Blade server
A blade server is a stripped down server computer with a modular design optimized to minimize the use of physical space and energy. Whereas a standard rack-mount server can function with a power cord and network cable, blade servers have many components removed to save space, minimize power...
technology connected by both a primary and a secondary network
Computer network
A computer network, often simply referred to as a network, is a collection of hardware components and computers interconnected by communication channels that allow sharing of resources and information....
. Access to the infrastructure is fully secured.
The exchange’s electronic trading platform is called Pearl and is designed to provide a highly available trading platform. It also allows HKMEx to handle high liquidity and trading volumes on a secure and scalable high-end platform, while also allowing rapid introduction of new contracts, services and types of trading.
Pearl continuously provides:
- Current bidsBiddingBidding is an offer of setting a price one is willing to pay for something. A price offer is called a bid. The term may be used in context of auctions, stock exchange, card games, or real estate transactions....
and offersAsk priceAsk price, also called offer price, offer, asking price, or simply ask, is the price a seller states she or he will accept for a good....
; - Depth of market views outside best bids/offers;
- Spread bid/offer, or the price differentials between different contract months
- Generation of implied prices where no active market currently exists, using values from trading in other contract months.
HKMEx's Pearl supports the industry-standard FIX 4.4 protocol for market access, as well as EMAPI, a proprietary API which provides speed and efficiency advantages. In addition, HKMEx can provide a trading front-end called Pearl Plus.
HKMEx is backed by a growing list of top-tier technology partners.
Clearing
HKMEx offers clearing and settlement services in cooperation with LCH.Clearnet, an independent clearing house serving major international exchanges and platforms. In its clearing for HKMEx trades, LCH.Clearnet is regulated by the Securities and Futures Commission in Hong Kong.Membership
HKMEx offers three categories of membership: Clearing, Broking and Proprietary Trader.Clearing Member
- Must be a member of LCH.Clearnet, HKMEx's appointed clearing house, and have access to its Extensible Clearing System (ECS)
- May also be a Broking Member and/or a Proprietary Trader Member of the exchange
Broking Member
- Trades for own account and/or clients’ accounts
- Must clear through a Clearing Member of the exchange
- May also be a Clearing Member
Proprietary Trader Member
- Trades solely for own account
- Must clear through a Clearing Member of the exchange
- May also be a Clearing Member
HKMEx has 23 members.
| Clearing Members | Broking Members |
|---|---|
| G. H. Financials Limited | BOCI Securities Ltd |
| Interactive Brokers (UK) Ltd | Bright Smart Futures and Commodities Co. Ltd |
| MF Global UK Ltd | Celestial Commodities Ltd |
| Morgan Stanley & Co International Plc | CES Capital International Co. Ltd |
| Chief Commodities Ltd | |
| GF Futures (Hong Kong) Co. Limited | |
| Haitong International Futures Limited | |
| ICBC International Futures Ltd | |
| Interactive Brokers LLC | |
| Jinrui Futures (Hong Kong) Limited | |
| KGI Futures (Hong Kong) Ltd | |
| MF Global Hong Kong Ltd | |
| Morgan Stanley Hong Kong Securities Ltd | |
| Nanhua Futures (Hong Kong) Co., Limited | |
| OSK Futures Hong Kong Ltd | |
| Philip Commodities (HK) Ltd | |
| Tanrich Futures Ltd | |
| TG Securities Ltd | |
| Wing Fung Futures Limited |
See also
- Commodity Market
- Commodity trading in private electronic marketPrivate electronic marketA private electronic market uses the Internet to connect a limited number or pre-qualified buyers or sellers in one market. PEMs are a hybrid between perfectly open markets A private electronic market (PEM) uses the Internet to connect a limited number or pre-qualified buyers or sellers in one...
s - ExchangeExchange (organized market)An exchange is a highly organized market where tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought.-Description:...
- Futures exchangeFutures exchangeA futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of...
- List of futures exchanges
- List of traded commodities
- Trader (finance)Trader (finance)A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...