HKEX to copy London Metal Exchange 'ring' at new Chinese commodity exchange

The Hong Kong bourse will copy the iconic open outcry trading ring at the London Metal Exchange (LME) in its new spot commodity platform in mainland China, seeking to lure Chinese producers and consumers. Qianhai, a new free trade zone near Hong Kong, will host the platform being put together by Hong Kong Exchanges and Clearing Ltd (HKEX) for trading metals before expanding into other commodities.
"If you visit that exchange, which we are just setting up and will be launching products next April, you will see it looks just like the LME, it actually has a ring," HKEX chief executive Charles Li said on Monday. "When you walk into the room ... you will say oh my God, we're in Finsbury in reality we'll be creating another LME," he told a seminar hosted by the LME that kicks off industry gathering LME Week.
At the LME headquarters in Finsbury Square, the trading floor "ring" hosts suited figures yelling and waving within a circle of red-leather benches, where deals are struck in intense five-minute bursts of shouting and arcane hand signals. HKEX owns the LME, which is one of the few remaining exchanges that still uses open outcry trading, mainly because of its popularity with its base of physical users such as producers and consumers. Li said the new exchange hoped to attract a huge untapped group of physical users in China who do not use commodity exchanges.
"In China's commodities market ... there are so few physical users who actually use the domestic futures market because it is all financially driven, all retail driven," Li said. The Shanghai Futures Exchange has seen climbing volumes, but is mainly known for having a big base of speculators and small retail investors, which can create volatile conditions.
Another element of HKEX's strategy to attract physical users to the new commodity spot platform is the LME's new warehousing certification system, LMEShield, which will test a pilot programme in China, the LME announced on Monday. "There are so few services that are provided to them (Chinese physical users), there are no warehouses that are trusted, no financing being made available," Li added. "What we are trying to do with the Qianhai Exchange is to solve the problem (in China) that globally was solved by the LME over the past 100 years."