Hong Kong targets July launch for new gold-clearing system
The government-owned mechanism will mirror the financial infrastructure used in London
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[HONG KONG] Hong Kong plans to launch a new gold-clearing system by July, advancing the city’s ambitions to become a global hub for bullion trading.
The government-owned mechanism will mirror the financial infrastructure used in London, the world’s largest bullion market, and allow participants to settle trades through unallocated accounts, people familiar with the matter said, requesting anonymity as they are not authorised to speak to the media.
Unallocated accounts allow for faster and more scalable trading, which is important for liquidity. They permit customers to hold a claim against the clearer on a quantity of gold without the need to own specific, numbered bars. Most precious metals traded in London are cleared in this way.
Hong Kong has invited a number of China-friendly central banks to participate in the clearing system as part of a push to promote itself as a trading, financing and storage hub. The special administrative region has also signed a cooperation pact with the Shanghai Gold Exchange and plans to expand gold-storage capacity to 2,000 tonnes within three years.
In an emailed response to questions, the Hong Kong government agency behind the clearing system, known as the Financial Services and the Treasury Bureau, said preparatory work “has entered its final stage and trial operation of the clearing system is scheduled to commence within this year”.
The clearing system has attracted significant interest from the industry, two of the people said, particularly from trading houses and financial institutions seeking an alternative for trading gold within Asia, home to two of the world’s major bullion consumers in China and India.
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Eleven banks – five Chinese and six international – are on the board of the Hong Kong clearing company, according to an announcement by the regional government last month. These include Industrial and Commercial Bank of China and Bank of China, as well as HSBC Group Holding, JPMorgan Chase and UBS Group.
The latter three banks, as well as ICBC Standard Bank, are the joint owners and operators of the clearing system in London. BLOOMBERG
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