Hong Kong Exchanges and Clearing Limited (HKEx) and the Shanghai Futures Exchange (SHFE) will jointly look into the possibility of developing an Asian energy derivatives market under a Memorandum of Understanding (MOU) signed today (Friday) by Charles Lee, chairman of HKEx, and Jiang Yang, chief executive officer of SHFE.
HKEx and SHFE will consider establishing and operating a joint venture enterprise based on international market standards that offers a series of benchmark energy derivative products designed to serve both Chinese and international investors under a single market.
The exchanges will set up a joint working group with representatives from HKEx and SHFE to develop a business model and mark out a joint venture structure to facilitate the possible introduction of crude oil futures contracts.
The exchanges will now begin discussions with market participants on the optimal terms for the proposed energy derivatives market and potential market demand, particularly the interests of Asian investors. If a sufficiently attractive business case can be developed, approval for the market and its products will be sought from the two markets' respective governmental and regulatory authorities. It is most likely that the first product introduced would be crude oil futures contract.
Mr Lee of HKEx described the collaboration with SHFE as another important step in HKEx's strategic plan to become the Asian hub of the global financial markets. He said, "We expect this collaboration will be beneficial to both exchanges, our market participants and shareholders. This proposed joint venture would broaden our customer base, diversify our product range and provide additional value-added services to customers across a broader geographical area. Ultimately, the proposal should contribute to the long-term business growth of both markets."
Mr Jiang of SHFE said, "This is the first time that a Mainland futures exchange explores substantive cooperation relationship with exchanges outside Mainland and also a new initiative for the cooperation between Shanghai and Hong Kong. By this cooperation, SHFE and HKEx can bring into full play the respective advantages and realise a win-win outcome to the mutual benefits. SHFE can also accelerate its step in the process of internationalisation."
About Hong Kong Exchanges and Clearing Limited (HKEx)
HKEx is the publicly listed holding company of the Hong Kong stock and futures exchanges and their related clearing houses. As of the end of March 2003, it had a market capitalisation of US$1.11 billion.
HKEx's stock exchange is the second largest in Asia in terms of market capitalisation and the ninth largest in the world.
HKEx operates a wholly electronic automatic order matching and execution securities trading system, and a linked electronic central clearing and settlement system. Settlement is on the second settlement day following a transaction (T+2).
Futures and options are also traded on a wholly electronic trading system; and all transactions are guaranteed and cleared through a linked electronic system.
For more information about HKEx, please visit: http://www.hkex.com.hk.
About Shanghai Futures Exchange (SHFE)
Shanghai Futures Exchange, which began its official operation on December 1999, is a self-regulated not-for-profit entity under the regulation of CSRC.
Currently, there are copper, aluminium and natural rubber futures listed in SHFE. The copper contract has become the benchmark in the Asia area, and the natural rubber contract also produce an increasing influence in the international markets.
The strategic target of SHFE is to become a regular, efficient and transparent exchange with financial derivatives as its flagship products.
For more information about SHFE, please visit: http://www.shfe.com.cn.