Hong Kong Exchanges and Clearing Limited (HKEX) announced its strategic collaboration with Guangzhou Futures Exchange (GFEX) to develop a cross-border carbon derivatives market in the Guangzhou-Hong Kong-Macao Greater Bay Area (GBA) on August 27, according to HKEX’s website. The two exchanges signed a memorandum of understanding (MOU) on that day, aiming to actively explore new opportunities to drive the development of a green and low-carbon market in the GBA region and further promote the development of futures market in China. In addition, the partnership is also to support China’s pledge to peak carbon emissions by 2030 and reach carbon neutrality by 2060.

HKEX is one of the founding shareholders of GFEX, with an investment of RMB210m in the mainland exchange for a 7% stake. Nicolas Aguzin, CEO of HKEX, said that HKEX is the first offshore institution to directly invest in a derivatives exchange in the Chinese Mainland. As the fifth futures exchange in the Chinese Mainland, GFEX was launched in April this year with a focus on developing carbon emissions derivative products. In the same month, CSRC said that it was guiding the new exchange to the research and development of carbon futures. Meanwhile, GFEX is one of the two designated trading centers of China Certified Emission Reductions (CCERs), the carbon emissions credits issued by the government, under the national emissions trading scheme (ETS). Although China’s ETS currently does not cover foreign investors, the market is expected to open up gradually to overseas participants and introduce more products for emissions trading. The collaboration of HKEX and GFEX marks the beginning of offshore involvement in China’s carbon derivatives market.

Sources:

https://www.hkex.com.hk/News/News-Release/2021/210827news?sc_lang=en

https://www.scmp.com/business/banking-finance/article/3146683/hkex-and-guangzhou-futures-exchange-explore-possibility

https://finance.sina.com.cn/stock/hkstock/hkzmt/2021-08-27/doc-ikqcfncc5400653.shtml

https://www.scmp.com/business/banking-finance/article/3130344/guangzhou-exchange-kicks-offering-hedge-carbon-emissions

https://www.theasset.com/asset-management/44694/exchanges-pave-way-for-carbon-derivatives-market-in-gba

https://finance.sina.com.cn/roll/2021-04-19/doc-ikmyaawc0583910.shtml