Monetary Authority Chief Executive Joseph Yam says Hong Kong needs to consider how to bring together the Mainland's demand-and-supply conditions and the city's efficient financial platform and open markets to develop the Mainland's commodity futures market.

In his Viewpoint column published today, Mr Yam said Hong Kong can help link the Mainland market to the international market for existing commodity futures products, and new products in which the Mainland has a comparative advantage.

For commodity futures products not yet available on the Mainland, and in which Hong Kong enjoys a competitive edge, consideration can be given to developing a specific futures market in Hong Kong.

Mainland investors' participation crucial

In developing these markets, it is crucial to have the participation of institutional and individual investors from the Mainland, Mr Yam said.

To achieve the goal, participants in the Mainland commodity futures market must be allowed to trade and develop commodity futures products in Hong Kong.

"Being among the world's largest market participants, the ability and willingness of Mainland institutions to develop and trade commodity futures in Hong Kong will send a strong signal to attract other overseas market participants to come here.

Arbitrage mechanism required

"Only then will it be possible for us to develop a commodity futures market of global significance within our country. And linking up the Mainland's and Hong Kong's markets will help develop the country's overall commodity futures market. Investors in Hong Kong and on the Mainland will then be able to trade financial derivative products and eliminate differences between the prices of the same financial instruments in the two markets. "