HKEx: gold futures returning this fall

Updated: 2008-07-03 07:26

By Kwong Man-ki(HK Edition)

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Trading of gold futures in the city will resume on Oct 20, the Hong Kong Exchanges and Clearing (HKEx) announced yesterday.

The Hong Kong Futures Exchange - a wholly owned subsidiary of the HKEx - will handle the trading, as it did during the 1980s and 1990s before the HKEx was established.

The bourse operator said the gold-futures market will be a regulated platform with products based on the London gold standard, which is popular among Hong Kong and international investors.

Gold futures will be traded in US dollars at the HKEx and cash-settled in US dollars. A contract size is 100 ounces, valued at $93,200, based on the June 30 gold price. The exchange fee will be $1.30 per contract, per side, but the fee will be waived during the first three months of trading.

Trading hours will be between 8:30am and 5pm, Monday through Friday, excluding local public holidays.

Contract months include spot month and the next two calendar months. In other words, on the rollout day, the contract months available for trading will be October, November and December.

The HKEx expects that Asian gold-market participants will be able to use the HKEx's gold futures to establish or adjust positions in reaction to local and overseas developments during the Asian business day.

"We aim to develop an Asian liquidity pool for trading of gold futures based on the London gold standard commonly used by international players," said Calvin Tai, HKEx's head of derivatives market. "HKEx always takes a long-term view when introducing new products, since they often take time to develop. So, we don't have any specific volume or open-interest targets for gold futures."

Simon Luk, regional vice president for Money Concepts (Asia), said: "It's late for the exchange to launch the gold-futures trading, but the timing is not too bad".

He noted that local investors may be interested, as commodities such as gold are usually a good investment vehicle to buck inflation.

"Hong Kong people are familiar with gold products, but we have to wait and see whether they have enough knowledge about the gold futures," Luk said.

The gold-futures markets are well established in the US and London, so if the exchange aims to compete with those markets, it has to offer products with more variety, he said.

(HK Edition 07/03/2008 page2)