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China's Gold Exchange

Foreign banks are entering China's new Gold Markets...

THE SHANGHAI GOLD EXCHANGE (SGE), China's only spot-price gold bourse, has seen banking major HSBC begin trading its Gold contracts for the first time, reports Commodity Online...

   Besides HSBC, two other foreign banks including Standard Chartered Bank (China) Ltd. and the Bank of Nova Scotia (Guangzhou Branch) have received approval from Chinese government to trade gold on SGE.

Chinese government has not paced any extra criteria on foreign banks such as trading volume or type when compared with other SGE members.

Official said the involvement of foreign banks could boost gold trading on the SGE. China's domestic gold market began opening up last June, when five foreign banks, HSBC, Standard Chartered, the Bank of Nova Scotia, UBS AG and Societe Generale, were granted preliminary approvals from the People's Bank of China to become SGE members.

It has taken almost a year for HSBC to begin Trading Gold on the SGE after receiving preliminary approval from the PBOC. The lengthy assessment period was to ensure that the opening of the domestic Gold Market is in the nation's interests.

The increased participation of banks will expand market liquidity while making arbitrage between the domestic and international markets more common.

Foreign institutions are not yet allowed to trade on China's gold futures market, which opened in January. However, as foreign institutions increase their standing in the domestic spot market, it will put added pressure on regulators to liberalize and open up other commodity markets to foreign participation as well.

Commodity Online is a leading online, print and content provider of news, information and research reports on the commodities sector. With offices in Mumbai, New Delhi, Ahmedabad, Cochin, Bangalore and Dubai, it also powers content in the SME sector, as well as the insurance and banking industries.

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