Aust-U.S. futures link

Press, 16 January 1985, Page 27

Aust-U.S. futures link

NZPA-AAP Sydney Sydney is set to become a peripheral market for one of the world’s busiest commodity exchanges when the Sydney Futures Exchange links with the New York Commodity Exchange later this year. The link will allow direct trading between Sydney and New York in gold-futures contracts, effectively making the Sydney Futures Exchange a trading arm of the New York exchange, usually known by its abbreviated name. Comex. Subject to Government approval in the United States and Australia, the link-up will allow trading in 100 ounce gold contracts, denominated in United States dollars. Futures exchange dealers say the move will facilitate easier trading, minimising

problems associated with exchange rate fluctuations. The link may be expanded to include other contracts such as silver, as well as gold and silver options. Most dealers, however, are only mildly enthusiastic about the direct New York connection. “I don’t see it as a panacea to make the S.F.E. the Comex Down Under," one bullion dealer said. He said only keen gold futures traders would hold out until 7 p.m. New York time to begin trading the morning session in Sydney, after the Comex close at 2.30 p.m. New York time. Two-way business would therefore be thin. Another dealer predicted Sydney would become a peripheral market, with volume about 10 per cent to 15 per cent of contracts traded on the Comex. Most dealers agreed with a

statement by Comex’s chairman, Mr Oscar Burchard, that the link would increase traders’ opportunities to minimise risks in changing market conditions. Some futures dealers said gold options would also be needed under the S.F.E.-Comex link to allow traders fully to minimise trading risks. But there was some doubt about local traders’ willingness to use the “sophisticated mathematics" of converting an option price to a futures price for a comparison with physical markets. Most dealers were doubtful whether investors in Hong Kong and Singapore would use the link, arguing that these investors were traditional traders of bullion, not futures. They said the SingaporeChicago futures link established last year had not performed as well as expected, partly for this reason.