The Hong Kong Exchanges and Clearing (HKEx) got a boost after the Chicago Climate Exchange (CCX) yesterday announced that it has begun talks with its counterparts, including HKEx and Tianjin Climate Exchange (TCX) over the launch of carbon emission futures.

The announcement came as a big boost for the HKEx as it was planning a foray into the emission futures sector. CCX said that both parties will study the plan details over the coming months.

HKEx chief executive Paul Chow earlier said that the environment-related futures products might be available in the middle of next year.

To facilitate the exploration, the HKEx has appointed a consultancy to study the feasibility of the plan last year. Chow said that it will also encourage issuers to roll out more emission ETF (exchange traded funds) or relevant structural products.

Under the Kyoto Protocol, a country can sell the quota of its carbon dioxide emission as commodities to other countries on commodity futures terms. That will spur the emission futures market.

The HKEx saw a 43-percent decline in net profits to HK$959.65 million in the third quarter as a result of the contraction in transactions in the equity market. It therefore endeavors to diversify its income sources with the expansion of the futures market.

The HKEx released small cap index futures and gold futures this year. The bourse was the most active futures market in the region, where turnover of futures and derivative contracts exceeded 100 million for 2008, rising 20 percent as compared with the transaction volume of 87.9 million in 2007.

The TCX is the first mainland emission trading market under China National Petroleum Corporation Assets Management, Tianjin Property Rights Exchange and CCX. The joint venture began operating in September.

(HK Edition 12/24/2008 page2)