HKEx to trade emissions

Hong KongÆs stock exchange is planning to establish a market in one of the cityÆs most abundant commodities: pollution.

Following the recommendations of a team of consultants, the exchange will partner with an overseas exchange to set up a trading and clearing platform for emissions-related structured products and exchange-traded funds (ETFs).

Paul Chow, the exchangeÆs chief executive, expects to reach an agreement before the end of the year and has also said that the exchange will consider setting up an auction for certified emissions reduction units, similar to the scheme already running in Europe.

The study û carried out by Mallesons Stephen Jaques, Climate Focus and International Environmental Trading Group û also considered the idea of trading derivatives, structured products and ETFs linked to gold. As a result, the exchange has said that it will send a proposal on trading cash-settled gold futures and options to the Securities and Futures Commission.

For the most part, the infrastructure needed to put these initiatives into practice is already in place. ôOur market systems can support the trading of the products that are part of these initiatives so any IT-related investment will be insignificant,ö says Chow. Even so, the chief executive clearly has no plans to rush things. ôInitiatives like these tend to have lengthy timeframes so we are taking a long-term view,ö he adds.