Hong Kong's International Financial Centre: Retrospect and Prospect

outside the Mainland. At the end of 2010, the Exchange was trading 3-4 million troy ounces of
gold per day, and settling nearly $5 billion per day in HK dollars. With offshore RMB business,
officials predicted a near-term expansion in volume by about 20%. 56
Of course, the accuracy of
such estimates depended both upon RMB balances continuing to build up in Hong Kong and
upon Mainland investors not choosing to move related activity to Shanghai, where a similar
exchange exists.
Similarly, after much preparatory work, the innovative Hong Kong Mercantile Exchange
recently launched its first product, a 32 troy ounce gold futures contract. Similar contracts are
expected to be available soon for ferrous metals and power. On-exchange as well as over-thecounter
facilities are being organized by HKMex. Participants will include end users, industrial
users, professional traders, swaps desks of investment banks, arbitrageurs, and high-net worth
individual investors.
In addition to drawing members from the ranks of established regional and global brokers
and traders, the new HKMex is primarily targeting leading Mainland producers and users of
commodities. As net buyers, these firms have traditionally had to hedge through international
exchanges. If they join the HKMex, the promise is better price discovery with proximity to the
home market and better management of counterparty risk. The Exchange also promises faster
clearing as well as clearing-house guarantees to both counterparties involved in a transaction.
Confidence is expected to be further bolstered by the fact that the Exchange is regulated by the
SFC.
56 Financial Times (London), 13 December 2010.
58