ASX pushes forward with gold contract, possible launch in H1 ’17

The Australia Securities Exchange (ASX) is getting ready to seek regulatory approval for its gold futures contract which could see the contract start trading within the first half of next year, Waqar Chaudry, ASX’s product manager for energy and commodities, said.

The contract could be rolled out around April-May, though this still needs to be confirmed by regulators, Chaudry told FastMarkets on the sidelines of the LBMA conference here on Tuesday.

ASX is also talking to potential market makers for the contract and there are interested parties so far, he said.

Feedback and consultation with the market on contract with will trade on the ASX’s derivatives trading platform – ASX Trade24 – had started as early as late last year.

The new contract will be US dollar-denominated and have contract size of 100 ounces. An investor will be able to take physical delivery into an unallocated account and utilise global loco swaps in most major locations.

The contract is expected to face competition from other dollar-denominated gold contracts, among these, the London Metal Exchange’s spot and futures gold and silver contracts expected in the first half of 2017, and the Intercontinental Exchange’s (ICE) London gold daily futures contract to be launched in February next year.

But Chaudry notes that the contract’s advantage over others in the market is Australia’s position as the world’s second largest gold producer and the largest net exporter of gold in the world. Its partnership with Perth Mint, which will honour the delivery process, will also ensure that good quality metal will be delivered to buyers, he noted.

Perth Mint is one of the world’s most respected and largest LBMA-accredited refiners, with some market participants noting that a single refinery may attract physical players and that Perth Mint bars are highly liquid and fetch a good premium in most major markets.

The contract will be the exchange’s first international commodity contract and first foray into metals futures. The exchange will look to expand into other metals contract in the future though this would depend demand, Chaudry said.

(Additional reporting by Ian Walker)

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