Pan-Asian commodity exchange to come up in 2009

Singapore: A pan-Asian commodity derivatives exchange that would be based out of Singapore aims to start trading by early next year, according to a statement by Financial Technologies, the Indian firm spearheading the project.

The Singapore Mercantile Exchange (SMX) will offer electronic futures trading in a wide array of products that will include energy and metals, and will have an initial capitalisation of Singapore $50 million, or $37 million. The statement said that it will most likely begin trades in the first quarter of 2009.

SMX chairman Ang Swee Tian said the exchange would reflect Asia's position as a major producer and consumer of commodities including oil, rice and precious metals. The announcement to set up the SMX comes in the wake of a similar announcement made by Hong Kong in June last year that revealed plans to set up a commodities exchange early next year.

The Hong Kong Mercantile Exchange will initially sell contracts on fuel oil, and aims at capitalising on China's growing demand for energy and other raw materials.

In a speech to a conference organised by Financial Technologies, Ang said "In recent years, with the rapid economic expansion in this region, in particular China and India, Asia has dramatically increased the demand for natural resources including energy, metal and agriculture products. Being home to the fastest growing economies and as the largest producer and consumer of several key commodities, Asia should logically be the price setter and not a price taker for these commodities."

Most of the world's main commodities exchanges are situated in the US and Europe, offering limited opportunities for Asia on account of the differences in time zones, said Ang. Singapore Mercantile Exchange said it is in the process of obtaining regulatory approval from the Monetary Authority of Singapore.

Financial Technologies said that SMX will have the world's best trading platform in commodities, and will be a combination of leading global exchanges like CME, LME, Nymex, and CBOT. Financial Technologies head Jignesh Shah said that the exchange would have multi-product portfolios in commodities, for which Financial Technologies is combining knowledge and technology for the correct price discover mechanism in commodities.

Financial Technologies also runs India's largest commodity exchange, the Multi Commodity Exchange (MCX), and the Middle East's largest commodity bourse, the Dubai Gold and Commodities Exchange (DGCX). The company is setting up MCX Africa to trade in a large number of commodities in the African nations. Financial Technologies holds 32 per cent in India's MCX.