Finance:Hong Kong Mercantile Exchange

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Hong Kong Mercantile Exchange (Chinese: 香港商品交易所; abbreviated as HKMEx) was an electronic commodities exchange established in Hong Kong for the trading of commodity futures, options and other financial derivatives. The exchange was originally pitched as a platform to trade oil futures.[1] In fact, it ended up trading mainly silver and gold futures.[2]

The exchange provided standardised, cleared, and exchange-traded products on a transparent pricing platform to the Asia-Pacific time zone. It was created to eliminate market liquidity risks associated with Asian market participants trading in faraway commodities exchanges such as New York and London.[3]

On 18 May 2013, the exchange ceased to trade upon surrendering its authorisation to provide automated trading services.[4] The Hong Kong Police made a series of arrests in connection with the exchange, and its chairman, Barry Cheung was sentenced to four years in prison over his role in the exchange.[5][6]

History

The exchange was announced at a Hong Kong press conference on 25 June 2008 by chairman Barry Cheung Chun-yuen. In attendance was Hong Kong Financial Secretary John Tsang who said there is "a huge opportunity for Hong Kong to develop a commodities futures market" in Hong Kong.[7] In March 2009, HKMEx appointed Albert Helmig, a former vice-chairman of NYMEX, as President of the exchange to lead day-to-day operations of the bourse.[8]

The exchange positioned itself as a trading forum located in Hong Kong, a jurisdiction entirely open to the free movement of capital and market participation by non-domiciled investors, while at the same time offering international market participants access to the booming mainland Chinese commodities market.[7] However, the China Securities Regulatory Commission denied authorisation to any offshore exchange to set up commodities futures delivery business.[9] It was not a full brokerage, but was licensed by the Hong Kong Securities and Futures Commission (SFC) for automated trading services.[10]

In June 2009, HKMEx and LCH.Clearnet agreed initial terms for LCH.Clearnet to provide clearing for the exchange.[11] In September 2009, HKMEx signed a contract with Hong Kong International Airport to use HKIA's Precious Metals Depository as a licensed storage venue for gold traded on the exchange.[12]

In December 2009, ICBC (Asia) acquired a 10% equity stake in the company, and said it intends to participate extensively in the exchange's operations as a trading and clearing member, as well as a settlement bank.[13] This was followed by a June 2010 announcement that En+ Group, owned by Russia's Oleg Deripaska, had also purchased a 10% equity interest.[14]

On 18 May 2011, HKMEx formally began trading with a US dollar gold futures contract.[15] In an interview with Reuters, Helmig said it plans to launch gold and silver futures contracts denominated in renminbi. He also said HKMEx will follow precious metals products with contracts in base metals, and then energy and agriculture.[16] On 22 July 2011, the exchange launched a second product, a US Dollar silver futures contract.[17] Its headquarters were at Cyberport, occupying over 47,000 square feet.

As of 5 pm on 13 February 2012, trading on HKMEx's gold and silver futures reached 1,003,210 contracts, representing total turnover of over US$50 billion (around HK$390 billion).[18] Trading on the exchange's US-dollar gold futures for the first time surpassed the 10,000 contract mark on 4 June 2012.[19]

On 2 August 2012, the exchange appointed Jane Wang and William Barkshire as co-presidents, following the retirement of Albert Helmig.[20]

Collapse

On 18 May 2013, the exchange surrendered its authorisation to provide automated trading services, citing insufficient revenue to support its operating expenses.[10][4] The exchange had been experiencing low trading volumes amidst competition from rivals in other countries and its financial reserves were depleted.[21] The firm had announced it intended to issue HK$780 million worth of shares in March 2013, but had postponed it until June.[10] There had also been rumours that, prior to the shut-down, Chairman Barry Cheung had obtained a loan of HK$100 million from a "major property businessman and supporter" of Chief executive Leung Chun-ying. New World Development chairman Henry Cheng denied he nor his firm had ever "had any financial and business dealing" with either the HKMEx or Cheung.[10] Mr. Cheung said that HKMEx would reapply for the licence after the business is recapitalised after its rights issue June.[21]

On 21 May 2013, the Hong Kong Securities and Futures Commission announced it was investigating "suspected irregularities in [HKMEx] financial affairs" and that it was referring the matter to the Hong Kong Police.[22][23] As of 25 May 2013, at five people had been arrested in connection with events connected to the exchange, including the alleged possession of false financial instruments.[5] Cheung was sentenced to four years imprisonment on conviction of fraud and conspiracy to defraud, a conviction which was upheld on appeal.[6]

The collapse of HKMEx had political implications for the Hong Kong government, as its chairman Barry Cheung, held a number of senior government positions and is closely identified with HK chief executive CY Leung.[22] Cheung took leave of absence from his official duties.[24][25] He since resigned not only from his government posts, but also from several private company boards.[5]

See also

References

  1. ↑ "HKMEx sets launch date for next month" (in en). 2011-04-28. https://www.scmp.com/article/966285/hkmex-sets-launch-date-next-month. 
  2. ↑ Chen, Te-Ping (25 May 2013). "Hong Kong Commodities-Exchange Head Faces Probe" (in en-US). Wall Street Journal. http://online.wsj.com/article/SB10001424127887324659404578504183782791330.html. 
  3. ↑ "Mercantile Exchange to deal first in gold contracts" (in en). 2009-11-12. https://www.scmp.com/article/698009/mercantile-exchange-deal-first-gold-contracts. 
  4. ↑ 4.0 4.1 http://hkmerc.com/en/Media-Centre/Press-Releases/HKMEx-Voluntarily-Surrenders-Authorisati.xml HKMEx Voluntarily Surrenders Authorisation To Provide Automated Trading Services (Press Release 18 May 2013)
  5. ↑ 5.0 5.1 5.2 "Hong Kong Police Make Fifth Arrest in HKMEx Investigation" (in en). Bloomberg.com. 2013-05-27. https://www.bloomberg.com/news/articles/2013-05-27/hong-kong-police-make-fifth-arrest-in-hkmex-investigation. 
  6. ↑ 6.0 6.1 "Ex-aide of former Hong Kong leader loses appeal against fraud conviction" (in en). 2022-02-16. https://www.scmp.com/news/hong-kong/law-and-crime/article/3167297/ex-aide-former-hong-kong-leader-cy-leung-loses-appeal. 
  7. ↑ 7.0 7.1 Man-ki, Kwong"HKMEx Eyes Fuel-Oil Contracts in '09". China Daily. 26 June 2008. http://www.chinadaily.com.cn/hkedition/2008-06/26/content_6795388.htm. Retrieved 9 December 2010. 
  8. ↑ "Press release: Hong Kong Mercantile Exchange Appoints President". HKMEx. 27 March 2009. http://www.hkmerc.com/en/Media-Centre/Press-Releases//Hong-Kong-Mercantile-Exchange-Appoints-A.xml. Retrieved 9 December 2010. 
  9. ↑ "Power broker" . The Standard, 31 May 2013
  10. ↑ 10.0 10.1 10.2 10.3 Victor Cheung (21 May 2013). "Legislator questions SFC's handling of failed exchange" . The Standard
  11. ↑ "HKMEx/LCH.Clearnet joint press release: LCH.Clearnet Set to Clear Trades on HKMEx". HKMEx/LCH.Clearnet. 11 June 2009. http://www.hkmerc.com/en/Media-Centre/Press-Releases//LCHClearnet-Set-to-Clear-Trades.xml. Retrieved 9 December 2010. 
  12. ↑ "Joint HKIA/HKMEx press release: HKIA Precious Metals Depository Opens". HKMEx/HKIA. 2 September 2009. http://www.hkmerc.com/en/Media-Centre/Press-Releases//HKIA-Precious-Metals-Depository-Opens.xml. Retrieved 9 December 2010. 
  13. ↑ "Joint ICBC (Asia)/HKMEx press release: Industrial and Commercial Bank of China (Asia) Limited Invests in Hong Kong Mercantile Exchange". ICBC (Asia)/HKMEx. 14 December 2009. http://www.hkmerc.com/en/Media-Centre/Press-Releases//Industrial-and-Commercial-Bank-Of-China.xml. Retrieved 9 December 2010. 
  14. ↑ "Joint En+/HKMEx press release: En+ Group Announces Acquisition of 10% Stake in HKMEx". En+/HKMEx. 14 June 2010. http://www.hkmerc.com/en/Media-Centre/Press-Releases//En-Group-announces-acquisition.xml. Retrieved 9 December 2010. 
  15. ↑ "Press Release: HKMEx Launches, Completes First Trading Day". HKMEx. 18 May 2011. http://www.hkmerc.com/en/Media-Centre/Press-Releases//Completes-First-Trading-Day.xml. Retrieved 18 May 2011. 
  16. ↑ Wong, Fayen"Hong Kong Mercantile Exchange eyes silver, base metals". Reuters. 7 July 2011. https://customers.reuters.com/community/newsletters/metals/MetalsInsider20110707.pdf. Retrieved 20 July 2011. 
  17. ↑ "Press Release: HKMEx to Begin Trading Silver Tomorrow". HKMEx. 21 July 2011. http://www.hkmerc.com/en/Media-Centre/Press-Releases//Begin-Trading-Silver-Tomorrow.xml. Retrieved 2 August 2011. 
  18. ↑ "Press Release: HKMEx Surpasses One Million Contract Mark". HKMEx. 13 February 2012. http://www.hkmerc.com/en/Media-Centre/Press-Releases//HKMEx-Surpasses-1-Million-Contract-Mark.xml. Retrieved 13 February 2012. 
  19. ↑ "Press Release: HKMEx Gold Trading Surpasses 10,000 Contracts". HKMEx. 4 June 2012. http://www.hkmerc.com/en/Media-Centre/Press-Releases/Gold-Trading-Surpasses-10K-Contracts.html. Retrieved 4 June 2012. 
  20. ↑ "Press Release: HKMEx Announces Jane Wang and William Barkshire as Co-Presidents". HKMEx. 2 August 2012. http://www.hkmerc.com/en/Media-Centre/Press-Releases/HKMEx-New-Appointment-Co-Presidents.html. Retrieved 2 August 2012. 
  21. ↑ 21.0 21.1 Vinicy Chan (19 May 2013) "Hong Kong Mercantile Exchange Forced to Shut on Lack of Revenue"
  22. ↑ 22.0 22.1 Lee, Simon; Himaras, Eleni (21 May 2013). "Hong Kong Police Investigate Failed Mercantile Exchange" Bloomberg, San Francisco Chronicle
  23. ↑ SFC statement on HKMEx. Hong Kong Securities and Futures Commission (Press Release 21 May 2013)
  24. ↑ "HK Mercantile Exchange in police and regulator probe". BBC News, 22 May 2013
  25. ↑ "CE accepts Barry Cheung's request to take leave from public service positions". https://www.info.gov.hk/gia/general/201305/21/P201305210732.htm. 

External links



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