Friday, June 15, 2012

Hong Kong Wins London Metals Exchange

June 15, 2012
Tom Steinert-Threlkeld

The London Metals Exchange goes to ? Hong Kong Exchanges and Clearing Limited.

The Chinese exchange operator?s $2.1 billion bid for the the world's largest market in options, and futures contracts on copper and other metals was accepted Friday by the board of the metals exchange?s parent, LME Holdings.

The Hong Kong bid beats that of Atlanta-based Intercontinental Exchange, which operates electronic marketplaces that trade in energy and commodity contracts. NYSE Euronext and CME Group dropped out of the competition months ago.

The Hong Kong Exchange eyed the purchase, as a way to combat declining stock market activity, a condition which also afflicts NYSE Euronext and other stock exchange operators. The World Federation of Exchanges says, statistically, that trading volumes in equities is down 17.9 percent in the first five months of this year.

At the same time, China is the world's largest consumer of commodities such as copper and accounts for around 60 percent of LME trading volume.

The London Metals Exchange brand will remain in place, the LME said, as will

the operation of the ?Ring? (open outcry trading), daily prompt date contract structure, existing membership structure and capacity for warehousing and physical delivery of metals.

The move also will help the LME expand in Asia and help it develop its own clearing house, LME Clear.

LME also hopes to leverage the Hong Kong exchange?s investments in advanced technology, it said.

The Hong Kong exchange last July launched construction of a $1.5 billion data center and is in the midst of a three-year technology overhaul that will, in its main markets, allow it handle as many as 150,000 orders a second.

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