Hong Kong Mercantile Exchange
| Company type | Private |
|---|---|
| Industry | Commodities exchange, Financial services |
| Founded | June 25, 2008 in Hong Kong |
| Founder | Barry Cheung Chun-yuen |
| Defunct | May 18, 2013 |
| Fate | License relinquished; ceased operations |
| Headquarters | Hong Kong (Cyberport) , Hong Kong |
Area served | Asia-Pacific region |
Key people | Barry Cheung (Chairman), Albert Helmig (President, former), Jane Wang (Co-President), William Barkshire (Co-President) |
| Products | Futures contracts for gold, silver, and other commodities; options; financial derivatives |
Hong Kong Mercantile Exchange (; HKMEx) was an electronic commodities trading platform based in Hong Kong, specializing in futures, options, and various financial derivatives. Although initially launched as a marketplace for oil futures, its main activity centered on trading futures contracts for silver and gold.
HKMEx provided standardized, exchange-cleared products with transparent pricing structures designed specifically for the Asia-Pacific region's trading hours. The exchange sought to mitigate liquidity challenges faced by Asian traders who otherwise had to engage with distant markets such as those in New York and London.
Operations at HKMEx were halted on 18 May 2013 when the exchange relinquished its license for automated trading services. Following this closure, investigations resulted in several arrests, including that of chairman Barry Cheung, who received a four-year prison sentence due to his role in the matter.
History
The establishment of the exchange was publicly announced at a press event in Hong Kong on 25 June 2008 by chairman Barry Cheung Chun-yuen. At the event, Hong Kong’s Financial Secretary John Tsang emphasized the potential to cultivate a commodities futures market within the city. In March 2009, Albert Helmig, formerly vice-chairman of NYMEX, was appointed President to oversee HKMEx’s operations.
HKMEx positioned itself as a Hong Kong-based platform facilitating free capital flow and offering international investors access to mainland China’s commodities markets. However, the China Securities Regulatory Commission did not grant approval for offshore exchanges to conduct commodities futures delivery businesses. While HKMEx held a license from the Hong Kong Securities and Futures Commission (SFC) to provide automated trading services, it did not operate as a full brokerage firm.
In June 2009, HKMEx reached an agreement with LCH.Clearnet for clearing services. By September that year, the exchange secured a contract with Hong Kong International Airport to utilize its Precious Metals Depository as authorized storage for gold traded through HKMEx.
December 2009 saw ICBC (Asia) acquire a 10% shareholding in HKMEx, aiming to serve as a trading and clearing participant as well as a settlement bank. Subsequently, in June 2010, En+ Group, controlled by Russian businessman Oleg Deripaska, also obtained a 10% ownership stake.
Trading commenced on 18 May 2011 with the launch of a US dollar-denominated gold futures contract. Helmig revealed intentions to introduce renminbi-based gold and silver futures contracts, followed by products covering base metals, energy commodities, and agricultural goods. On 22 July 2011, HKMEx rolled out a US dollar silver futures contract. The exchange’s headquarters were situated at Cyberport, occupying over 47,000 square feet of office space.
By 13 February 2012, cumulative trading volumes for gold and silver futures exceeded one million contracts, amounting to turnover surpassing US$50 billion. On 4 June 2012, gold futures trading volumes surpassed the milestone of 10,000 contracts.
Following Helmig’s retirement, Jane Wang and William Barkshire were appointed co-presidents on 2 August 2012.
Collapse
On 18 May 2013, the exchange voluntarily relinquished its licence to offer automated trading services, attributing the decision to inadequate revenue streams that failed to cover operational costs. The platform struggled with diminished trading activity due to stiff competition from global counterparts, which drained its financial resources. Initially, the company intended to launch a HK$780 million share offering in March 2013 but deferred this plan until June. Speculation arose that Chairman Barry Cheung had obtained a HK$100 million loan from a prominent property tycoon associated with Chief Executive Leung Chun-ying, although Henry Cheng, chairman of New World Development, denied any financial transactions involving HKMEx or Cheung. Cheung announced that HKMEx aimed to reapply for its licence following recapitalisation through the proposed rights issue.
On 21 May 2013, the Hong Kong Securities and Futures Commission revealed it was investigating "suspected irregularities in [HKMEx] financial affairs" and had referred the matter to the Hong Kong Police Force. By 25 May, five individuals connected to the exchange were detained amid accusations involving fraudulent financial documents. Subsequently, Cheung was convicted and sentenced to four years in prison for fraud and conspiracy to defraud; this verdict was confirmed upon appeal.
The downfall of the exchange triggered political fallout due to Cheung’s prominent governmental positions and close association with CY Leung. As a result, Cheung took a leave from his official responsibilities and later resigned from his government roles as well as several directorships in private enterprises.