Hong Kong Law
April 2014
HKEx to Launch its First Asia Commodities Contracts

HKEx to Launch its First Asia Commodities Contracts

Hong Kong Exchanges and Clearing Limited (HKEx) announced yesterday, 22 April 2014, that it plans to launch its commodities business with four futures contracts that will be traded in its derivatives market. The four futures contracts are:

  • London Aluminium Mini Futures;

  • London Zinc Mini Futures;

  • London Copper Mini Futures; and

  • API 8 Thermal Coal Futures

HKEx aims to introduce the contracts later this year, pending regulatory approval and market readiness.

HKEx stated that the rationale behind the new business is to meet the needs of the industry in Asia and to provide currency convenience through contracts in RMB.

The new business is a further step to expand HKEx’s commodities business following its acquisition of the London Metal Exchange (LME) in 2012.

Basic market information

The following table contains the basic market information provided by HKEx in relation to the commodities covered by the proposed futures contracts:

  Aluminium Copper Zinc Thermal Coal
Major Users
  • Construction
  • Packaging
  • Transportation
  • Automotive
  • Construction
  • Electronics
  • Automotive
  • Construction
  • Automotive
  • Batteries
  • Electricity
  • Consumption in China as a Percentage of World consumption 45% 44% 44% 45%
    Year-on-year Growth in 2013 8% 11% 11% 5%


    Key contract specifications

    All four contracts will be traded on the Hong Kong Futures Exchange Limited (HKFE) and cleared through HKFE Clearing Corporation Limited. They will all be monthly cash-settled futures contracts. The key contract specifications which are subject to regulatory approval are summarised in the table below.

     

    London Aluminium Mini Futures London Zinc Mini Futures London Copper Mini Futures API 8 Thermal Coal Futures
    Underlying Commodity High Grade Primary Aluminium as defined in the LME Rules Special High Grade Zinc as defined in the LME Rules Copper – Grade A as defined in the LME Rules API 8 Thermal Coal Index
    Contract Size 5 tonnes 200 tonnes
    Trading and Settlement Currency RMB US dollar
    Contract Months Spot Month and the next eleven calendar months (monthly contracts) Spot Month and the next twenty-three calendar months (monthly contracts)
    Trading Hours 9:00 am to 4:15 pm (day trading session) and 5:00 pm to 1:00 am
    (after-hours trading session)
    8:00 am to 4:15 pm (day trading session) and 5:00 pm to 1:00 am
    (after-hours trading session)
    Trading Platform Hong Kong Futures Automated Trading System (HKATS)
    Tick Size RMB 5 / tonne RMB 10 / tonne USD 0.01 / tonne
    Last Trading Day Two business days before the 3rd Wednesday of the spot month The last Friday of the Contract Month
    Final Settlement Price Official Settlement Price determined and published by the LME on the Last Trading Day The monthly average API 8 Index published in the Argus/McCloskey’s Coal Price Index Report on the last Friday of the expiring Contract Month
    Settlement Method Cash-settled
    Holiday Schedule Follow HKEx holiday schedule


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    Charltons – Hong Kong Law Newsletter – Issue 238 – 23 April 2014

    HKEx Asia commodities contracts

    Futures contracts traded in Hong Kong

    Hong Kong futures

    Commodities covered by the proposed futures contracts

    Four futures contracts traded in Hong Kong derivatives market

    Hong Kong Asia commodities contracts

    London Aluminium Mini Futures

    London Zinc Mini Futures

    London Copper Mini Futures

    APIAPI 8 Thermal Coal Futures

    London Metal Exchange LME
    Futures Trading
    Hong Kong Futures Exchange LTD