The Hong Kong contract will be settled in cash against The Steel Index Ltd price, which refers to ore with 62 percent content delivered to the Chinese mainland. “With very active onshore iron ore futures on the Dalian Commodity Exchange and the heavy weighting of the Chinese mainland in the trading of iron ore and iron ore derivatives, HKEX believes a transparent offshore iron ore futures will allow more efficient and timely price interaction among the markets.” “HKEX believes this contract is going to be complementary,” a spokesman told Bloomberg. While HKEX has been building up its presence in metals - buying up the iconic London Metal Exchange - the new offering is its first ferrous product. Among other global exchanges, CME Group Inc and Intercontinental Exchange Inc also offer products tracking the raw material. That’s been a boon for SGX, where trading of iron ore derivatives jumped 59 percent last year. This year, it’s gyrated between almost US$95 and close to US$50 with the Chinese mainland’s environmental clampdown in focus, along with booming supplies from Australia and Brazil. By 2015 it fell below US$40 as supplies swelled and investors expected the Chinese mainland’s appetite to wane. ![]() In 2013, iron ore fetched more than US$100 a metric ton. ![]() The shakeup comes after miners and investors have been on wild ride. Some of that will depend on the terms they’re able to offer, such as trading fees and margins, as well as the liquidity of the contracts.” “It’s too early to gauge whether the new contract will gain much traction. “They’re going up against a more established offshore contract in Singapore,” said Hui Heng Tan, an analyst at Marex Spectron. To add firepower to the opening salvo, HKEX has promised newcomers all trading fees for the new product will be waived for six months Given the lead, the HKEX may find it a hard task to break out of its beachhead. found in an 2016 study that it was SGX’s product that probably swayed the global market, rather than the more restricted offering on the mainland’s Dalian Commodity Exchange. The derivatives are used by miners and mills for hedging, as well as traders and funds, and Goldman Sachs Group Inc. Iron ore sits at the heart of the global economy, especially in largest user the Chinese mainland, and the commodity has attracted growing investor interest in recent years. To add firepower to the opening salvo, HKEX has promised newcomers all trading fees for the new product will be waived for six months. HKEX began trading the futures on Monday, pitting the new dollar-denominated contract against those offered by SGX, which introduced its first swap contracts in 2009 and has become the world’s largest clearer of the derivatives. Two of Asia’s financial heavyweights are going head-to-head as Hong Kong Exchanges & Clearing Ltd starts futures for a commodity that’s seen extraordinary volatility and been a popular way to bet on the Chinese mainland, challenging Singapore Exchange Ltd’s leading position. (ANTHONY WALLACE / AFP)Ĭall it the iron ore wars. In this photo, the flag of the Hong Kong Exchanges and Clearing Limited (right) is hoisted next to China's flag, center, in Hong Kong.
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