NEW YORK Hong Kong
Exchanges & Clearing Ltd. will get tough with warehousing
companies that it finds to be acting against the rules of the
London Metal Exchange, or even outside of the spirit of the
rules, its chief executive officer said.
The "conspiracy theory" that the
LME protects the vested interests of exchange-approved
warehouses and their owners should gradually vanish now that
HKEx has taken over, Charles Li told AMM in an
exclusive interview in Hong Kong.
"Whatever the perception of the
market of the LMEs existing board or management or
regulatory infrastructure, those views shouldnt be with
us anymore, as HKEx has no reason to favor anybodywe only
care about the market," he said. "When we come to a view on
warehousing, I think the conspiracy theory will hopefully
disappear, because no single group will be able to exert a
greater level of influence over us than another."
The storage of metal has been a
controversial subject for the past two years, with the debate
pitting warehousing firms owned by Glencore International Plc,
Goldman Sachs Group Inc. and JPMorgan Chase & Co. against
household names like Coca-Cola Co.
The contention centers on
ownership and delays in getting access to metal.
Li said he didnt believe
openly bad behavior was being tolerated or encouraged, but
added that big players at multiple points of the value chain
will have advantages. "And those advantages are sometimes being
used within the confines of regulatory restrictions, and
sometimes (the rules are) probably being breached somewhere
else," he said.
"If they are breached and not
being penalized, thats the LMEs problem. But I
dont think that is the case, and I dont think
thats even the criticism," Li said. "The criticism is
that somehow the system is allowing them to do this, and I have
yet to get people to articulate to me exactly where this has
Li said this was "very
uncomfortable territory" for HKEx.
"You dont know whether
its not a problem at all, or whether its something
that nobody has any idea of how to deal with it," he added.
But HKEx is now "psychologically
over those concerns," Li said.
"The reason we eventually
proceeded with the transaction was the progressively deeper
understanding of the issuewe came to a point that we
think firstly that the system is clearly not broken, no matter
what people are saying; and No. 2, there are no easy solutions
or answers because theres not even an easy consensus as
to what the problem was," he said.