Hong Kong and Shanghai exchanges in energy derivatives venture

The Hong Kong Exchanges and Clearing Limited (HKEx) and the Shanghai Futures Exchange (SHFE) have signed a memorandum of understanding to develop an Asian energy derivatives market, the exchanges said today.

The exchanges plan to set a joint venture structure that will work on “a series of benchmark energy derivatives products (such as crude oil futures contracts), and the products would be designed to serve both Chinese and international investors under a single market,” HKEx deputy chief operating officer Lawrence Fok said.

Fok added that “HKEx and the Shanghai Futures Exchange agree that crude oil is vital to the further economic development of Mainland China and the rest of Asia. We also agree that this region appears to need a market for the transferring and managing of the price risks associated with crude oil.”

The latest memorandum follows an agreement signed last month between the Chicago Mercantile Exchange (CME) and SHFE to collaborate in derivatives product development.

The SHFE was created in December 1999 as a result of the merger between the Shanghai Metal Exchange, the Shanghai Cereals and Oil Exchange and the Shanghai Commodity Exchange. Copper, natural rubber and aluminium are the most traded contracts on the Exchange.

The HKEx currently offers equity, interest rate and fixed-income derivatives. Products range from futures and options on the Hang Seng Index, futures and options on individual stocks and futures on the Hong Kong interbank offered rate.

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