Remarks by Mr Lawrence Fok
Deputy Chief Operating Officer
Hong Kong Exchanges and Clearing Limited
for news conference with Shanghai Futures Exchange

Good afternoon ladies and gentlemen.

It is my privilege to represent HKEx here today.

The memorandum of understanding we are announcing this afternoon with our friends from the Shanghai Futures Exchange marks another milestone in co-operation between the exchanges in Hong Kong and our counterparts on the Mainland.

We look forward to exploring the possibility of developing an energy derivatives market with the Shanghai Futures Exchange.

We are thinking about a joint venture enterprise based on international market standards. The enterprise would offer a series of benchmark energy derivative products, and the products would be designed to serve both Chinese and international investors under a single market.

We will set up a working group to develop a business model and joint venture structure for the possible introduction of crude oil futures.

We will also be meeting with our market participants to discuss the ideal framework for the proposed energy derivatives market, and potential demand. We are especially interested in their thoughts on the potential demand from investors here in the Asia-Pacific region.

If we come up with a blueprint that makes good business sense, we will seek regulatory approval.

We are focusing on energy derivatives and crude oil futures because we believe they have good potential.

The Asia-Pacific region has several major crude oil importers and several major exporters.

Demand continues to rise as economies grow and mature around the region.

HKEx and the Shanghai Futures Exchange agree that crude oil is vital to the further economic development of Mainland China and the rest of Asia.

We also agree that this region appears to need a market for the transferring and managing of the price risks associated with crude oil.

For HKEx, this collaboration is another important step in our strategic plan to become the Asian hub of the global financial markets.

We expect it will be good for both parties, and for participants in the two markets.

Finally, this collaboration highlights Hong Kong and Shanghai's complementary roles in the further economic development of China. It is clear evidence that we have different strengths and are working together to make the most of those strengths.