The SHFE fears losing pricing influence and trading volumes and warehousing revenue should the LME achieve its long-standing goal of adding Chinese warehouses to its global network, they said.
“It is only natural for the Shanghai Futures Exchange to oppose LME warehouses,” a warehousing source in China said. “They fear it will mean less people will trade on the SHFE platform. They see it as being like opening a restaurant inside another restaurant: their own volumes will fall as a result.”
The exchange is therefore expected to lobby hard with the China Securities Regulatory Commission (CSRC), the financial regulator which rejected the prospect of LME warehouses in China some five years ago.
The ability of Hong Kong Exchanges and Clearing (HKEx) to better argue the case for warehouses on the Chinese mainland was seen as an important justification for its £1.39 billion ($2.22 billion) purchase of the LME last year.