Plans are afoot to build and trade on a pan Asian commodity derivatives exchange by 2009 in Singapore. The new exchange, called the Singapore Mercantile Exchange, will provide a platform for futures and options trading on precious metals, base metals, energy, agricultural commodities, currency pairs, carbon credits and commodity indices said the Indian firm, spearheading the project – Financial Technologies.
The exchange, according to the Economic Times will have an initial capitalization of 50 million Singapore dollars (US$ 37 million). “We expect Asia to lead the growth in the commodities markets in the next few years,” the chairman of the advisory board of SMX, Leo Melamed, said in a press release.
“Market participants around the world will benefit from price discovery of these commodities in Asia. The SMX will be a barometer for the dynamic demand-supply fundamentals in this region.”
The move comes after Hong Kong last month disclosed plans to launch a Hong Kong Mercantile Exchange that will trade fuel-oil contracts for the mainland Chinese market.
In China, markets in Shanghai and Dalian are expanding into trading futures for steel and live hogs, respectively. A market in Zhengzhou is seeking government approval to trade in rice futures.
The Asian cities want to capitalize on the rush of investment into a wide variety of commodities, which have soared in price in part because of rising demand from fast-growing Asia.
The wall street journal reported that global turnover in commodity derivatives, including futures and options, jumped 52% to 489 million contracts in the first quarter of this year compared with the year-earlier period, according to the Bank for International Settlements, which serves as a bank for central banks.
Many Asian markets already trade several types of futures, which are contracts to buy or sell commodities at a certain price and time, and already do a brisk trade in physical delivery. But most of the world’s biggest commodities markets are New York, Chicago and London.
The efforts face tough odds. Exchanges around the globe have had trouble creating new benchmark commodity contracts, in part because traders are hesitant to trade in significant size in a new contract without proven liquidity.
