* CME likely to launch contract in Hong Kong - sources
* Contract size expected to be 1 kg
* Rivals have been boosting Asia commodities operations
By A. Ananthalakshmi and Frank Tang
SINGAPORE/NEW YORK, April 24 CME Group Inc
plans to launch a physically deliverable gold futures
contract in Asia, three sources familiar with the matter said,
as the world's No.1 futures exchange targets rising hedging and
investor demand in the top gold-consuming region.
An Asian contract from CME could help set a pricing
reference for gold futures in Asia, much like its U.S. COMEX
gold contract sets the benchmark for bullion futures globally.
The move may also help CME boost flagging revenues from its
precious metals futures and comes as its rivals are expanding
their presence in Asia to tap demand from China, the world's
biggest consumer of commodities, including gold.
CME is most likely to launch the gold contract in Hong Kong,
with Singapore also an option, two sources briefed on the matter
said, adding the contract is likely to be launched this year.
A third source, a market maker, said CME was looking to
launch a 1 kilogram (35.3 ounces) contract.
The plan has not yet been finalised and CME could still
scrap it, one of the sources said. No other details of the plan
The sources spoke on condition of anonymity as they were not
authorised to speak to the media.
"We regularly talk with our customers and market
participants about new and innovative ways to help them manage
their global price risk," said a CME Group spokesman, when asked
about the Asian contract.
CME's COMEX contract - widely used for hedging by jewellers
and refiners around the world, and speculation - is mostly cash
In the first three months of 2014, U.S. COMEX gold futures
volume fell 10 percent from a year ago. The new Asian contract
could help boost volumes for CME.
Asia is the top consumer of bullion in the form of
jewellery, bars and coins. Demand for physical gold in Asia has
climbed over the past year after the metal's price
slumped as western investors dumped the metal on expectations a
strengthening economy will dampen gold's safe-haven appeal.
As gold tumbled 28 percent in 2013, China's imports of the
metal from main conduit Hong Kong more than doubled to about
The success of the Asian gold contract, however, will depend
on the finer details, such as contract size, trading hours and
the liquidity it can garner, said a Hong Kong-based precious
CME's U.S. futures are 100-ounce contracts which are
too big for Asian clients, the trader said. They are still the
most liquid gold futures in the world.
The most-traded Asian gold futures contract currently is the
one on the Shanghai Futures Exchange, which is a 1
kilogram contract. But it is closed to foreign investors.
CME's Asian gold contract could be the first among its
biggest rivals, who have already been boosting their regional
IntercontinentalExchange Group last year announced
the acquisition of Singapore Mercantile Exchange, while Hong
Kong Exchanges and Clearing Ltd, owner of the London
Metals Exchange, said this week it was entering the Chinese
commodities derivatives market.
And the Singapore Exchange is looking to launch a
contract this year, along with the government-backed industry
body Singapore Bullion Market Association, as the southeast
Asian country aims to get a say on gold pricing, sources told
Reuters earlier this year.
(Editing by Muralikumar Anantharaman)