HKEX launching Qianhai commodity trading platform with LME hookup

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Hong Kong Exchanges and Clearing Limited (HKEX) unveils its Qianhai commodity trading platform this week – a move that it hopes will firmly establish its presence in mainland China, Reuters reported earlier today.

As the metals industry meets for LMEWeek Asia in the Chinese territory, the focus will be on the Hong Kong bourse’s latest attempt to take on China’s home-grown exchanges in Shanghai, Dalian and Shenzhen.

The owner of the London Metal Exchange (LME) will host a visit on Thursday to its spot-trading platform in Qianhai, near Hong Kong.

The aim is to connect Qianhai with the LME, luring customers with opportunities to be active in both the mainland’s domestic markets and international markets.

For years the Hong Kong bourse has tried to build up a mainland business, banking on its location as the perfect meeting point for China’s mainland and global commodities traders, a strategy it bankrolled with a $2.2 billion buyout of the London bourse back in 2012.

HKEX CEO Charles Li is hoping the Qianhai platform will attract an industrial base to use its commodity contracts, which will be backed by warehousing and logistics chains with a view to create prices that reflect the physical market.

The LME has set up a new warehousing certification system to track metal and cut fraud, after several financing scandals rocked the industry in recent years. LMEShield will have a one-year pilot program in China.

But industry insiders are skeptical that the exchange will offer them something that they don’t already have:

They have to define what makes it relevant,” said John Browning, managing director of Hong Kong-based broker BANDS Financial. “If there is a vacuum that this exchange is going to fill, why hasn’t it been filled before?

LMEWeek Asia will also mark Matthew Chamberlain’s debut as LME CEO, after he took the top job last month, when he also set down a roadmap to reverse the LME’s falling liquidity.

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