Published On: Wed, Apr 23rd, 2014

HKEx Announces Plans For Its First Asia Commodities Contracts

Charles Li CEO HKEx

Charles Li CEO HKEx

Hong Kong Exchanges and Clearing Limited (HKEx) plans to launch its commodities business with four futures contracts that will be traded in its derivatives market in Hong Kong: 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.

“The rationale behind our Asia Commodities platform is to meet the needs of the industry here in Asia, and provide currency convenience through contracts in Renminbi (RMB),” said HKEx Chief Executive Charles Li. “The interest in this year’s LME Week Asia shows how important Asia is to the global commodities business.”

“This is just the beginning of our Asia Commodities plan,” Mr Li added.

The London Metal Mini Futures

The London Metal Mini Futures will be traded in RMB, with contract size of five tonnes each. The Final Settlement Price will be the Official Settlement Price determined and published by the London Metal Exchange (LME) for the London Aluminium/ Zinc/ Copper Futures Contract on the Last Trading Day on the LME. These contracts will cover the Spot Month and the next 11 calendar months.

Large versions of the metals contracts are the LME’s top three contracts by turnover volume and value. In the first quarter of this year, their volume accounted for more than 80 per cent of the LME’s futures volume.

The API 8 Thermal Coal Futures Contract

Energy and commodity publisher Argus and business information provider IHS are licensing the API 8 coal index to HKEx for listing of the API 8 Thermal Coal Futures. The index tracks the price for coal (5,500 kcal/kg NAR, or net as received) delivered to south China. API 8 is part of a series of indices used for international physical and derivatives coal business.

The API 8 Thermal Coal Futures Contract will trade in US dollars, with a contract size of 200 tonnes. The Final Settlement Price will be the monthly average of all API 8 prices published in the Argus/McCloskey’s Coal Price Index Report in the expiring contract month. The contract will cover the Spot Month and the next 23 calendar months.

Thermal coal is a leading fuel for power generation. In Mainland China, around 70 per cent of the electricity comes from coal-fired power plants. The Mainland is among the largest producers, consumers and importers of thermal coal. The other largest consumers include Japan, India, South Korea and Taiwan.

Trading Details

All the four contracts will be traded on Hong Kong Futures Exchange Limited (HKFE) and cleared through HKFE Clearing Corporation Limited. All the contracts will be monthly cash-settled futures contracts. The trading hours for the new London Aluminium/ Zinc/ Copper Mini Futures will be 9:00 am to 4:15 pm and 5:00 pm to 1:00 am the next morning Hong Kong time Monday to Friday, excluding the public holidays on HKEx’s trading calendar. The trading hours for the thermal coal futures will be 8:00 am to 4:15 pm and 5:00 pm to 1:00 am the next morning Hong Kong time Monday to Friday, excluding the public holidays on HKEx’s trading calendar. Pre-holiday arrangements will also be the same as those for existing contracts traded on HKFE. Key contract specifications are shown in the tables below subject to regulatory approval.

 

Item

London Aluminium Mini Futures

London Zinc Mini Futures

London Copper Mini Futures

Underlying Commodity

High Grade Primary Aluminium

as defined in the LME Rules from time to time

Special High Grade Zinc

as defined in the LME Rules from time to time

Copper – Grade A

as defined in the LME Rules from time to time

Contract Size

5 tonnes

Trading and Settlement Currency

RMB

Contract Months

Spot Month and the next eleven calendar months (monthly contracts)

Trading Hours*

9:00am to 4:15pm (day trading session) and 5:00pm to 1:00am

(after-hours trading session)*

Trading Platform

HKATS

Tick Size

RMB 5 / tonne

RMB 10 / tonne

Last Trading Day

Two business days before the 3rd Wednesday of the spot month

Final Settlement Price

Official Settlement Price determined and published by the LME on the

Last Trading Day

Settlement Method

Cash-settled

Holiday Schedule

Follow HKEx holiday schedule

 

Item

API 8 Thermal Coal Futures

Underlying Commodity

API 8 Thermal Coal Index

Contract Size

200 tonnes

Trading and Settlement Currency

US dollar

Contract Months

Spot Month and the next twenty-three calendar months (monthly contracts)

Trading Hours*

8:00am to 4:15pm (day trading session) and 5:00pm to 1:00am

(after-hours trading session)*

Trading Platform

HKATS

Tick Size

USD 0.01 / tonne

Last Trading Day

The last Friday of the Contract Month

Final Settlement Price

The monthly average API8 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

* subject to regulatory approval

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