freemexy: What China problem?

What China problem?

Jan 14 2020 at 01:46

President Donald Trump may be escalating his trade war with China, but the U.S. futures industry is lauding progress between the two nations, and companies are pushing ahead with their own efforts to work with the Chinese.To get more latest banking and finance news, you can visit shine news official website.

CME, the largest futures exchange operator in the world, announced this month it will partner with the Shanghai Gold Exchange in October to list new gold contracts based on that foreign exchange's benchmark price, pending regulatory approvals. Likewise, the Shanghai Exchange will launch new contracts linked to CME's Comex gold futures prices.

Such advances in cross-pollination of the financial markets fly in the face of Trump's recriminations about China's lack of openness. U.S. traders may relish the volatility created by the president's trade war in the short term because of opportunities for gains on market swings, but leaders of the industry are showing that longer-term U.S. trading interests favor calling out the positive gains made in recent years between the two trading giants.

The Futures Industry Association, the Washington trade group that represents U.S. futures interests and advocates for them in Washington as well as abroad, recently offered support for changes made by the China Securities Regulatory Commission, the agency that oversees the country's securities and futures markets, and for efforts advancing foreign participation under President Xi Jinping's leadership.

"The CSRC has been pretty open in trying to make sure more foreign participation comes into the Chinese markets," says Walt Lukken, president of the Futures Industry Association. While he says the Chinese are often slow and methodical with changes, the fruits of shifts in recent years are showing up now. He raised the issue in a Chicago presentation last month and reiterated it in remarks afterward.

Lukken cited the decision by the Shanghai exchange last year to list its first crude oil futures contract and to invite international participation in trading of the contract. He says he's unaware of any grousing about competition the new contract may mean for CME's WTI crude benchmark contract or Atlanta-based Intercontinental Exchange's Brent crude benchmark contract. The idea is for China to create its own futures industry benchmarks, he says.

"They're hoping that our expertise, and our liquidity that we can provide their markets, will help to develop those benchmarks," Lukken says. "It has to flow both ways. They're giving us access into China, but we're giving them access into the United States."

Lukken also notes China's plan next year to eliminate a cap on foreign ownership of Chinese brokerages that support the futures industry, among others. While China's easing of such restrictions has been underway since 2017, its reforms were sped up this year.

While some may attribute the acceleration to Trump's tough rhetoric, the futures industry was making progress before that and in spite of some moves by the U.S. that might have made such steps forward difficult. For instance, the U.S. government last year blocked a sale of the Chicago Stock Exchange to a Chinese investment group suspected of having ties to the Chinese government.

As U.S. market participants have made gradual inroads in China, especially in the metals, energy and currency markets, Chinese counterparts have steadily increased their presence on U.S. exchanges, contributing to a doubling of trading volume from Asia at CME since 2012. U.S. traders, especially Chicago's pit veterans like CME CEO Terry Duffy, aren't known for being soft when it comes to pursuing their interests.


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