HKEx to broaden LME offerings in two years

Hong Kong Exchanges and Clearing Ltd intends to offer new commodities about two years from now following its purchase of the London Metal Exchange.

HKEx Chief Executive Charles Li said the acquisition of LME will also provide the best opportunity for exposure to Chinese growth and liberalization. He noted that HKEx will work immediately to improve LME’s existing products suite and reduce or eliminate barriers for Asian investors to trade,

Li said LME will then focus on adding new commodity products that might include iron ore or iron ore freight, coking coal, rubber or possibly jet fuel. Some would be Asia-based products, but would benefit from the LME's credibility.

Li, however, pointed out that HKEx will probably postpone introducing new commodities products until it completes plans for a new in-house clearing mechanism that will guarantee trades. That could take 18-24 months.

HKEx will then work to improve the market through electronic trading and modernization. Business opportunities for the LME and HKEx will depend more on how much China opens up to outside investment than on the pace of China's economic growth, Li said.

HKEx last July 25 took over ownership of LME, the world’s leading commodity exchange for US$2.2 billion. LME handles over 80% of the world's trade in industrial-metal futures and sets global prices for metals, including copper, aluminum and nickel. LME handled a record US$15 trillion in contracts last year.

It is the first overseas acquisition for HKEx, the world's second-biggest exchange by market value, and its first contracts in commodities. LME members may get more access to China, which consumes more metals than any other nation.