Hong Kong Exchanges May List Cash-Settled Commodity Contracts

Hong Kong Exchanges & Clearing Ltd. (388), the world’s second-largest bourse operator, said it plans to list commodity futures that are settled in cash.

The new contracts may be iron ore, coking coal and agricultural products and denominated in the Chinese currency, a spokesman said by phone today. The exchange has yet to set a start date, he said.

Hong Kong Exchanges, led by Chief Executive Officer Charles Li, bought the London Metal Exchange, the world’s largest metals bourse, last year for $2.2 billion to expand into commodities. The purchase may help it increase business in China, the biggest consumer of energy and metals from steel to copper and aluminum.

The initial products would be cash-settled because to take whatever contracts are traded in London to Hong Kong would only spread liquidity and not benefit the business, the spokesman said. The products could be derivatives of those in London and be based on the needs of market users, not just China, he said.

The LME trades physically delivered futures in metals ranging from copper and aluminum to nickel and tin.

The exchange will also work with bourses on the Chinese mainland to see if their products can be brought to Hong Kong on a Hong Kong platform or whether international contracts can be taken to the mainland, the spokesman said. There are no specific details at this point, he said.

Hong Kong Exchanges shares fell 0.8 percent to HK$121.10 today, the third consecutive daily decline. The benchmark Hang Seng Index slumped 2.9 percent. The bourse is the world’s second-largest after CME Group Inc. by market value.

To contact the reporters on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net; Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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