Horn
21st May 2013, 10:24 AM
Hong Kong regulators have opened an investigation into alleged financial irregularities at Hong Kong Mercantile Exchange, the commodities bourse that shut down on Monday.
The Securities and Futures Commission confirmed on Tuesday that it had initiated a probe last week into the two-year-old exchange that was backed by Chinese state companies including Industrial & Commercial Bank of China and Russian billionaire Oleg Deripaska.
“In light of the evidence obtained, the SFC referred certain matters to the Commercial Crime Bureau (CCB) as the suspected irregularities are serious ones,” the regulator said in a statement.
The revelation came only a day after HKMEx said it was in effect closing (http://blogs.ft.com/beyond-brics/2013/05/20/1324952/) operations as revenues from trading could not support its operating expenses. The SFC subsequently withdrew its authorisation to offer the automated trading services on which HKMEx depended.
The business failed to make headway against established incumbents such as Hong Kong Exchanges & Clearing as market infrastructure providers and investors bet on a shift in financial gravity from west to east. While the region, and China in particular, has been a key source of demand for commodities, Asia has so far failed to establish a strong commodities exchange.
HKMEx offered only a gold futures contract (http://www.ft.com/cms/s/0/57c9df82-cec8-11de-8812-00144feabdc0.html) and a silver futures contract, both denominated in US dollars. However trading volumes have dropped dramatically this year even amid demand for gold in Asia. The number of contracts on the exchange tumbled more than 70 per cent in the first four months of the year, from more than 450,000 a month to about 135,000.
The SFC added that it had not disclosed the investigation to HKMEx before Tuesday. “The SFC will continue its investigation and will co-operate fully with the CCB,” it said.
The regulator also said customers’ open positions, mainly used in derivatives trading, had been completed and LCH.Clearnet, the Europe-based clearing house, had begun returning collateral relating to the HKMEx market back to clearing members.
http://www.ft.com/cms/s/0/b4c4b0be-c216-11e2-ab66-00144feab7de.html#axzz2TwtZhtu2
The Securities and Futures Commission confirmed on Tuesday that it had initiated a probe last week into the two-year-old exchange that was backed by Chinese state companies including Industrial & Commercial Bank of China and Russian billionaire Oleg Deripaska.
“In light of the evidence obtained, the SFC referred certain matters to the Commercial Crime Bureau (CCB) as the suspected irregularities are serious ones,” the regulator said in a statement.
The revelation came only a day after HKMEx said it was in effect closing (http://blogs.ft.com/beyond-brics/2013/05/20/1324952/) operations as revenues from trading could not support its operating expenses. The SFC subsequently withdrew its authorisation to offer the automated trading services on which HKMEx depended.
The business failed to make headway against established incumbents such as Hong Kong Exchanges & Clearing as market infrastructure providers and investors bet on a shift in financial gravity from west to east. While the region, and China in particular, has been a key source of demand for commodities, Asia has so far failed to establish a strong commodities exchange.
HKMEx offered only a gold futures contract (http://www.ft.com/cms/s/0/57c9df82-cec8-11de-8812-00144feabdc0.html) and a silver futures contract, both denominated in US dollars. However trading volumes have dropped dramatically this year even amid demand for gold in Asia. The number of contracts on the exchange tumbled more than 70 per cent in the first four months of the year, from more than 450,000 a month to about 135,000.
The SFC added that it had not disclosed the investigation to HKMEx before Tuesday. “The SFC will continue its investigation and will co-operate fully with the CCB,” it said.
The regulator also said customers’ open positions, mainly used in derivatives trading, had been completed and LCH.Clearnet, the Europe-based clearing house, had begun returning collateral relating to the HKMEx market back to clearing members.
http://www.ft.com/cms/s/0/b4c4b0be-c216-11e2-ab66-00144feab7de.html#axzz2TwtZhtu2