HKEx Proposes To Build "London-Hong Kong Connect"

Hong Kong Futures Exchange Limited (HKFE), HKFE Clearing Corporation Limited (HKCC), the London Metal Exchange (LME) and LME Clear Limited (LME Clear), subsidiaries of Hong Kong Exchanges and Clearing Limited (HKEx) and members of the HKEx Group, have signed a non-binding memorandum of understanding (MOU) for the proposed development of a trading link between HKFE and the LME and a clearing link between HKCC and LME Clear, to be named “London-Hong Kong Connect”.

The MOU was signed as part of the cooperation initiatives announced in a ceremony led by Chinese President Xi Jinping and British Prime Minister David Cameron.

If implemented, the link will enable HKFE’s eligible Exchange Participants to trade LME products, and HKCC’s eligible Clearing Participants to clear those trades.   Development of the model is at a preliminary stage and further work needs to be done to determine the appropriate trading and clearing arrangements.

“This is another step in the development of the HKEx Group,” said Sir C K Chow, Chairman of HKEx.  “Our link will be an important bridge between Hong Kong and London, two of the world’s leading financial centres.   Intermediaries and investors in Hong Kong will be able to have fast, stable and low cost access to the LME.”

“The LME’s growing business ties with Asia, a major source of both supply and demand for the base metals industry, will become even stronger as a result of this project,” said Sir Brian Bender, Chairman of the LME.  “The MOU we signed today represents another close and mutually beneficial business relationship between China and the United Kingdom.”

“Enhanced market access is a key component of our strategy,” said Charles Li, Chief Executive of HKEx.  “This link aims to expand the potential investor base of the LME market, give the LME a new presence in Asia, where it has many opportunities, and support the development of Hong Kong as a commodities trading centre.”

“As domestic investors gain more opportunities to move beyond their home market under China’s gradual opening measures, we want to be able to offer them access to multiple asset classes so they can benefit from a broad variety of investment opportunities,” said Garry Jones, HKEx’s Co-head of Global Markets and Chief Executive of the LME.

Implementation of the trading and clearing links is subject to regulatory approval in Hong Kong, the United Kingdom and the European Union.  No formal agreement has been entered into and HKFE, HKCC, LME and LME Clear will discuss the types of products to be involved, the operational model, the system requirements and other related issues with the relevant regulators, and will update market participants in due course.