Shanghai Gold Exchange in talks with CME to list contracts

[SHANGHAI] The Shanghai Gold Exchange is in discussions with the CME Group Inc about listing each other's contracts on their respective exchanges, according to Shen Gang, vice president of the SGE.

The Shanghai gold bourse will list contracts and prices on the CME in the first phase of the cooperation, Mr Shen said Thursday at a conference in Shanghai. The CME's contract will then be available to members of the Chinese exchange during a second phase, she said. An agreement will be signed in August and trading may begin in the first quarter of next year, according to Shen.

China, the top consumer of raw materials, is expanding its presence in gold and currency markets worldwide and a deal for the Shanghai bourse would bring it closer to CME's Comex, the biggest futures market for gold. The country saw a surge in commodities-derivative trading last year and policy makers are making a case to add the yuan to the International Monetary Fund's basket of reserve currencies.

"If they do partner up, it will create a very robust marketplace," Bernard Sin, the head of currency and metal trading at MKS (Switzerland) SA, a Geneva-based refiner, said by phone. "CME has been very excited to work with the Chinese, and the Chinese would really like to tap into CME for their experience."

China is taking steps to be more involved in the London gold market. Bank of China Ltd became the first lender from the country to join London's price-setting process last week. Industrial & Commercial Bank of China Ltd is looking at either joining directly or through its UK-based Standard Bank Plc unit, Zhou Ming, general manager of the precious metals department at ICBC, said at a conference Thursday in Shanghai.

The Shanghai Gold Exchange plans to develop platinum and palladium products, Gang said at the conference. It will also start a yuan-denominated benchmark by the end of the year if approved by the People's Bank of China, she said.

Donal McCarthy, a London-based spokesman for CME, declined to address specifically Shen's comments.

"We are constantly in talks with market participants to better serve the needs of our customers," Mr McCarthy said.

The SGE will also open a trade link with the Hong Kong- based Chinese Gold & Silver Exchange Society on July 10, according to Mr Shen. The Shanghai bourse is also in discussions with the Dubai Gold & Commodities Exchange to introduce yuan- denominated gold products in Dubai, she said.

BLOOMBERG