China banks slow to join LME as members - board exec

06/20/2013

By Polly Yam

HONG KONG, June 20 (Reuters) - The London Metal Exchange (LME) is trying to attract Chinese banks as members but has so far succeeded in drawing only one mainland financial institution to the world's biggest metals marketplace, a board member said.

LME, which was bought in December by Hong Kong Exchanges and Clearing (HKEx) in a $2.2 billion deal, approved as a member last year the Bank of China International (BOCI) Global Commodities, an arm of the nation's No. 4 lender Bank of China .

In order to become a clearing member of the LME, a Chinese firm has to set up a London office, which is regulated by the U.K. regulator with mininum capital required, Romnesh Lamba, who is also executive vice president and co-head of global markets division at HKEx, said.

"There are obviously several Chinese banks that have the capability of doing that. So far only one has done it," Lamba told Reuters.

Asked whether other Chinese banks have applied for membership of the LME, he said: "Not yet, to my knowledge".

Not all of China's banks are active in commodities today because in the mainland the most active futures players are futures brokers, and the banks are still relatively new to the commodities market, Lamba added.

The LME would have the capability to accept the Chinese yuan to clear its dollar-denominated contracts after its own clearing system is launched next year, which could attract more volumes from the Chinese, he said.

HKEx did not have any plans for mergers and acquisitions currently, Lamba said.

The exchange was looking internally and externally for a new LME CEO to replace Martin Abbott, who will leave by end-2013. Lamba said the new CEO was unlikely to come from the HKEx and he or she would have to meet U.K. and European regulatory requirements. He ruled himself out as a contender.

HKEx is considering launching LME 'minis' futures contracts on its arm, Hong Kong Futures Exchange, Lamba said. That would increase commodity trading volumes in the city and would not take away activity from the LME, he said.

In the longer term, the Hong Kong Futures Exchange may trade most LME products with smaller sizes and settled by cash, he said.



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