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HKEx Completes LME Acquisition

by Mary Swire, LawAndTax-News.com, Hong Kong

13 December 2012


Hong Kong Exchanges and Clearing Limited (HKEx), the world’s second largest exchange group by market capitalization, has confirmed the completion of its GBP1.4bn (USD2.25bn) acquisition of the London Metal Exchange (LME), the world’s leading exchange for the trading of base metals futures and options contracts.

HKEx’s securities market is also the world’s sixth largest in terms of market capitalization At the end of November this year, shares of 1,540 companies with a combined value of USD2.7 trillion were listed at HKEx, including shares of 714 Mainland Chinese enterprises.

The LME is an international exchange with an estimated 80% market share of global base metal futures trading volume. Last year, it had record trading volume of 146.6m lots and the notional value of all contracts traded was USD15.4 trillion. In the first 11 months of this year, 147.44m lots were traded on the exchange.

Speaking at a plaque unveiling at the LME Ring to mark the occasion, HKEx Chairman Chow Chung Kong said: "We are embarking on a new journey. HKEx and the LME share the same vision: to build the best exchange business in the world. By working together and helping each other, we will grow our businesses in new and exciting ways.”

It is pointed out that the LME enhances HKEx’s position as China’s link to international markets and investors, and gives it multi-asset-class capabilities and accelerates its expansion into commodities, currency and fixed income. The LME’s business model, combined with its high levels of liquidity, mean that the prices discovered are recognized and relied upon by the metals industry worldwide. As a result, the LME plays a vital role in providing risk management solutions to consumers and producers of metals globally.

HKEx and the LME are committed to focusing together on preserving and enhancing the LME’s existing business model; expanding the presence of the LME in Mainland China and the rest of Asia; and developing the LME over time in accordance with the needs of its members and market participants.

For example, the LME plans to become a self-clearing exchange group by 2014 through the development of LME Clear, which will enable it to launch new products and services and diversify its revenue sources.

Charles Li, its Chief Executive, confirmed that HKEx is "delighted that, as of today, the LME is formally part of the HKEx group. We are confident that this partnership will deliver enormous benefits over time as we leverage our relationships and knowledge to build on LME’s strong global position."

Martin Abbott, Chief Executive of the LME, added that "the LME will remain the world’s foremost base metals exchange thanks to HKEx’s position in Asia, its infrastructure and resources. We begin a new chapter today but the LME is more secure than at any point in its 135-year history."

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
TAGS: investment | business | capital markets | mergers and acquisitions (M&A) | United Kingdom | offshore | stock exchanges | Hong Kong | trade | alternative investment | services

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