Shanghai Gold Exchange (SGE), China's sole gold transaction market, is to speed up progress to achieve the level of international markets by upgrading systems and developing new products.

Shen Xiaorong, chairman of the SGE board, said Monday at the London Bullion Market Association (LBMA) Precious Metals Conference that establishing a safe, efficient and high-capability trading system that could adapt fully to the evolution of gold transactions in China was a key point in the steady operation and sustainable development of the SGE.

"Put into operation on August 16, the SGE's new trading system now supports 1,000 quotations a second and 3 million customers at the same time," said Shen.

"In addition to maintaining current business, this new trading system can also support spot, forward, deferred and even futures trading methods."

Besides infrastructure facility renovation, SGE attaches great attention to developing new trading products with hedge functions to meet the needs of various investors.

On June 28, SGE began a trial listing of small-scale (50 grams) gold bars, which lowered the threshold for investors to enter the market and widened the pool of trading participants.

"We are continuously strengthening our creation of products, seen in T+5 (transaction days, plus five days), adding deferred trading to the base of spot trading to help meet the requirements of locking in costs and maintaining value to hedge uncertainty due to price fluctuations," Shen said.

The current trail of deferred transactions is being conducted in installments. Traders can choose to deliver before, on or after the contract day through negotiations between buyer and seller.

Zhou Xiaochuan, governor of the People's Bank of China (PBOC), indicated at the working conference of the PBOC earlier this year that, by further developing the gold market, creating safety and a highly efficient gold trading system and exploring new trading products with investment and hedging functions, the Chinese gold market would fulfill a transition from the present spot market to a comprehensive financial market.

Officially opened in October 30, 2002, the overall operation conditions of the SGE have progressed steadily.

By the end of July, the combined trading volume of SGE had reached 363.76 tonnes with a turnover of 36.861 billion yuan (US$4.44 billion).

And from the beginning of this year to July 31, total trading volume was 170.043 tonnes, up 36.53 percent year-on-year, and turnover reached 18.247 billion yuan (US$2.2 billion), 57.04 percent higher compared with the same period last year.

(China Daily September 7, 2004)