Shanghai Gold Exchange Plans to Promote Gold Derivatives

Strategic Insights -

The Shanghai Gold Exchange (SGE) is gearing up to introduce gold derivatives, including futures, options, and swaps, as part of a broader strategy to promote the country's gold market. According to Shen Xiangrong, SGE's chairman, gold derivatives will represent the trend of the gold market, shifting from commodity trading to financial transactions. This move is part of a long-term plan to transform the gold market, a goal first proposed by Zhou Xiaochuan, Governor of the People's Bank of China, in 2004. Despite growing investment in the gold market, it has not been fully tapped due to limited market products and strict regulations.

Key Takeaways:

  • The Shanghai Gold Exchange (SGE) plans to launch gold derivatives, including futures, options, swaps, and funds, to promote the country's gold market.
  • Shen Xiangrong, SGE's chairman, believes that gold derivatives will represent the trend of the gold market, shifting from commodity trading to financial transactions.
  • The introduction of gold derivatives is a long-term plan to transform the gold market, a goal first proposed by Zhou Xiaochuan, Governor of the People's Bank of China, in 2004.
  • The preparedness for the launch includes both technological and human resource development.
  • Mature markets indicate that derivatives are a basic foundation for exchanges' sustainability and development.

Statistics:

  • The New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM) reported a combined transaction volume of 58,000 tons in 2005.
  • The transaction volume on the NYMEX and TOCOM in 2005 was 18,000 tons and 40,000 tons, respectively.
  • The Shanghai Gold Exchange is in the process of developing its technology and qualified personnel for the launch of the planned derivatives.
  • The transaction volume by the SGE in relation to the planned derivatives introduction is not specified.
  • The Chinese gold market is expected to see significant growth with the introduction of gold derivatives.

Sources:

  • Asia Pulse, "Shanghai Gold Exchange Plans to Promote Gold Derivatives", Nov 28
  • XIC, "Statement by Shen Xiangrong, Chairman of SGE's board of directors"