LCH.Clearnet clears for Hong Kong Mercantile Exchange

London, 19 May 2011

LCH.Clearnet Ltd (LCH.Clearnet) has begun clearing for the Hong Kong Mercantile Exchange (HKMEx), a new commodities exchange based in Hong Kong.  Trading on the exchange began yesterday with a 32 troy ounce gold futures contract with physical delivery in Hong Kong. Contracts in other precious metals, as well as energy, agricultural products and commodity indices are intended to be launched soon. 

The Hong Kong Mercantile Exchange aims to provide a seamless, state-of-the-art electronic platform for commodities trading in the Asia-Pacific time zone, riding on Hong Kong’s world-class financial infrastructure, geographical proximity to China, and unique role as China’s offshore renminbi centre.

LCH.Clearnet provides clearing services to HKMEx using existing clearing technology which has been recently enhanced to the Asia-Pacific trading day. Dedicated to providing innovative clearing solutions to new markets, LCH.Clearnet also clears a range of OTC commodities including, FFAs, steel, iron ore, containers, fertilizer, emissions, coal and gold.

Ian Axe, CEO, LCH.Clearnet said: “The commodity derivatives markets in Asia are developing fast and have huge potential. We are pleased to be supporting HKMEx with our unparalleled expertise in this area as they develop a successful and truly international commodities exchange”

Barry Cheung, Chairman of HKMEx, said: “By having all transactions on HKMEx cleared through LCH.Clearnet, we are providing our commodities investors and users with a prudent counterparty risk mitigation tool, helping us to become the premier gateway for the world’s commodities trading with China.”

HKMEx started trading with 3 clearing members and 15 trading members.  HKMEx is backed by global and regional shareholders including China’s ICBC and COSCO Group, as well as Russia’s En+ Group.

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To view the press release as a pdf click here.

About Hong Kong Mercantile Exchange (HKMEx)

The Hong Kong Mercantile Exchange provides a seamless, state-of-the-art electronic platform for commodities trading in the Asia-Pacific time zone, riding on Hong Kong’s world-class financial infrastructure, geographical proximity to China, and unique role as China’s offshore renminbi centre. 

HKMEx is authorised by the Securities and Futures Commission to operate as an automated trading services provider.  HKMEx trades are cleared and settled through HKMEx-appointed clearing house LCH.Clearnet in London.  Trading activity on the HKMEx trading platform is not covered by the Investor Compensation Fund.

For more about HKMEx, visit www.hkmerc.com.

About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets.  It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, CDS and euro and sterling denominated bonds and repos; and  works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade.  When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in.  By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations.  The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis.  Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times. LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.