SGX to wind down LME mini contracts given low volumes

SYDNEY Fri Jan 17, 2014 4:15am EST

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SYDNEY Jan 17 (Reuters) - Singapore Exchange (SGX) plans to wind down its mini metals contracts, launched in 2011 to tap into Asian retail interest in the commodities boom but which failed to gain traction.

The contracts, 5-tonne lots of copper, aluminium and zinc, were launched in February 2011 as a joint venture with the London Metal Exchange and as copper prices soared to record highs.

The failure of the contracts was partly down to lukewarm support from LME members who were reluctant to promote contracts that could be traded in competitor markets and erode their own market share, industry sources said.

SGX may designate the LME minis as dormant contracts, not available for trading or clearing, pending regulatory approval, an SGX spokeswoman said via email.

The LME had reviewed the products together with SGX, "and concluded that it would like to pursue alternative options for growing trading volumes in Asia," the LME said in an emailed statement.

When Hong Kong Exchanges and Clearing Ltd (HKEx), a regional rival for SGX, bought the LME for $2.2 billion in December 2012 the fate of the LME-SGX joint venture was sealed.

HKEx CEO Charles Li told Reuters last month the exchange plans to launch monthly, cash-settled futures contracts based on its suite of LME contracts which could include cash settled minis contracts.

"I think there would be a market for it, absolutely," one senior trading source said, adding that the Hong Kong Exchange may have more success in tapping Chinese retail clients because of its metals franchise and its existing client base. (Reporting by Melanie Burton; Editing by Michael Urquhart)

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