Hong Kong vs Singapore; who will win the iron ore wars?

(Nov 13): Call it the iron ore wars. Two of Asia’s financial heavyweights are going head-to-head as Hong Kong Exchanges & Clearing starts futures for a commodity that’s seen extraordinary volatility and been a popular way to bet on China, challenging Singapore Exchange’s leading position.

HKEX began trading the futures on Monday, pitting the new dollar-denominated contract against those offered by SGX, which introduced its first swap contracts in 2009 and has become the world’s largest clearer of the derivatives. To add firepower to the opening salvo, HKEX has promised newcomers all trading fees for the new product will be waived for six months.

Iron ore sits at the heart of the global economy, especially in largest user China, and the commodity has attracted growing investor interest in recent years. The derivatives are used by miners and mills for hedging, as well as traders and funds, and Goldman Sachs Group found in a 2016 study that it was SGX’s product that probably swayed the global market, rather than the more restricted offering on the mainland’s Dalian Commodity Exchange. Given the lead, the HKEX may find it a hard task to break out of its beachhead.

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