Chapter 1113: The Four Pillars of the Futures Field

After Wang Qi finished speaking, Xia Yu looked at Zhao Zhiyuan. After seeing his expression of approval, Xia Yu nodded in secret.

He looked at Wang Qi again and said, 'Wang Qi, the trading system and management rules definitely need to be changed. Tell me your views on trading commodities. If you were to become the chairman of the futures exchange, what would you do?'

'Don't be stressed, just speak your mind.'

This question from Xia Yu was crucial.

Suddenly asking Wang Qi for his opinion did put him under a lot of psychological pressure.

Fortunately, Xia Yu's attitude was very kind and casual, which eased Wang Qi's psychological burden.

Wang Qi also knew Xia Yu's character, so since the chairman had said so, he calmed down and thought quietly.

Xia Yu smiled and whispered to Zhao Zhiyuan, 'Zhiyuan, you also think about it. In what direction can our exchange rebuild the market and make the exchange rise again?'

'Yes, boss.'

Zhao Zhiyuan whispered in response and also fell into thought.

While the two men were thinking, Xia Yu took a notebook and pen from the desk and, combining his own experience and memories, started to write intermittently.

After a long time, Wang Qi's voice rang out, interrupting Xia Yu's train of thought.

'Boss, I have some ideas,'

Xia Yu put down his pen, nodded slightly to Wang Qi, and said with a faint smile, 'Tell me.'

Wang Qi took a deep breath and began to speak: 'Chairman, at present, the types of futures on the Xiangjiang Commodity Exchange are actually just two: agricultural futures and metal futures.'

'Agricultural futures only include raw sugar, cotton, soybeans and corn, and the turnover is low. The market in Xiangjiang is small and cannot accommodate large-scale capital entry. This type of futures is suitable for being used as a finishing touch in the later stages, but not as a pillar.'

'The market capacity of gold futures in metal futures is sufficient, but the key is that it is not suitable for the current situation in Hong Kong. Hong Kong itself is a gold and silver trading market, with many banks and goldsmiths, and the competition is extremely intense. Furthermore, it is also subject to competition from the local London gold market. Many companies in Hong Kong sell London gold futures on behalf of others.'

'Hong Kong's own gold and silver exchange and the local London gold market both allow deferred delivery, and have long since possessed the characteristics and functions of a gold futures market. Therefore, our gold futures cannot be irreplaceable, and it is difficult for us to compete.'

'I won't say much about silver futures, as the market is already in decline.'

'After analysing, the Hong Kong Mercantile Exchange does not have a pillar-type futures contract, which is the most fatal.'

'In my opinion, a pillar-type futures contract needs to have two characteristics: one is a large capital capacity, and the second is temporary irreplaceability, that is, uniqueness.'

'Then let's look at the classification of futures. The major categories can be divided into two types: commodity futures and financial futures.'

'Commodity futures can be further divided into metal futures, agricultural futures, and energy futures.'

'Financial futures can be divided into stock index futures, interest rate futures, foreign exchange futures, etc.'

'Our company is called the Xiangjiang Commodity Exchange, and our positioning is commodity futures. However, whether it is metal futures or agricultural futures, it is not a good time to do it. We can trade crude oil futures in energy futures, but because our local oil consumption is low, we are just a transit station, and we do not have large-scale crude oil storage facilities, so we are not qualified to create competitive crude oil futures for the time being.

'But we do have one thing here, and that is the Hang Seng Index. There are no Hang Seng Index futures in the world. If our exchange can no longer be limited to commodity futures trading and open up the financial futures market, although the management difficulty, cost and risk will be much higher, the market will also expand dozens or even hundreds of times. We have unique advantages and the possibility of success is very high.'

'My personal opinion is to restructure the Heung Kong Commodity Exchange into a full-category futures exchange, starting with financial futures. We can make Hang Seng Index futures a pillar, and then further launch foreign exchange futures, interest rate futures, etc. As an international trade transit city, Heung Kong has hundreds of bankers alone, and major global banks have branches here. We have great prospects for launching foreign exchange futures and interest rate futures.'

'Once the financial futures market is successful and the market capitalisation is huge, it will not be too late to launch agricultural futures, energy futures and metal futures at the right time. Relying on the huge capital volume is enough to drive the trading of commodity futures in each sub-category.'

'Chairman, the above is my humble opinion, please give me some pointers!'

'Clap, clap...'

After Wang Qi finished speaking, Xia Yu applauded with a smile, praising, 'Very well said, very intuitive and clear, and highly actionable.'

After Wang Qi received Xia Yu's praise, his heart completely sank, a smile appeared on his face, and he kept on being humble.

'Thank you, Chairman, for your praise!'

Xia Yu ignored Wang Qi's self-deprecating behaviour, turned his head and looked at Zhao Zhiyuan, who looked deeply inspired, and said with a smile, 'Zhiyuan, Wang Qi has expressed his own opinions, what about you? What are your thoughts?'

Zhao Zhiyuan hurriedly came back from the huge shock of ideas.

He took a deep breath to calm his inner turmoil, and said, 'Boss, I very much agree with Mr. Wang's opinion. With your influence in the financial sector, the financial futures market is the most suitable direction for the development of our exchange. I don't have any other ideas.'

It wasn't that Zhao Zhiyuan didn't want to make a brilliant performance, but after hearing Wang Qi's opinion, he was also at a loss. Compared to Wang Qi's proposal, his ideas were simply not up to scratch. In that case, he might as well keep quiet and just follow orders.

Xia Yu smiled and didn't care.

His main goal was to let Wang Qi show off and convince Zhao Zhiyuan, so that Wang Qi could easily put Zhao Zhiyuan in his place and make Zhao Zhiyuan willingly cooperate with Wang Qi's work.

And Wang Qi really didn't let him down, worthy of being his right-hand man in the financial field.

He instructed Wang Qi and Zhao Zhiyuan, 'Wang Qi, Zhiyuan, let me clarify the division of labour between you: Wang Qi will be the chairman of the exchange, and Zhiyuan will be the vice-chairman and CEO of the company.'

'The first thing is to re-register the exchange as the Hong Kong Futures Exchange, and expand the commodities business to include all types of commodities. You will be responsible for following up on this matter. If there are any obstacles from the Hong Kong government, just let me know and I will have someone deal with it.'

'The second thing is to re-establish the trading rules and management regulations of the exchange. You, Wang Qi, will take the lead on this. You have a lot of experience after working on the establishment of the Unified Stock Exchange. I will give you some of my suggestions later, and you can incorporate them.'

'The third thing is to comprehensively reorganise the employees of the exchange and establish a brand new personnel system. Those who are incompetent should be dismissed. We must build an elite team. You, Zhiyuan, will take the lead on this, and I will ask Korn Ferry International to assist you.'

'The fourth thing is hardware construction. The current venue of the stock exchange is not suitable. The stock exchange must be located in Central Plaza, and it must be built to the standards of the Hong Kong Stock Exchange. The trading method should be positioned as fully computerised, abandoning all face-to-face trading. The venue selection and construction and machine procurement work will be handled by Wang Qi, as you have experience in this area.'

'The fifth thing is about trading commodities. Hang Seng Index futures have great potential, but this pillar alone is not enough. At present, the Hong Kong stock market is still sluggish, and the Hang Seng Index futures market is not big enough. We need to launch the Nikkei 225 stock index futures, the FTSE 100 stock index futures, and the natural rubber futures at the same time. The listing of these four major commodities together will definitely create a huge buzz for the Hong Kong Futures Exchange.'

'You, Wang Qi, will be in charge of this matter. For the Nikkei 225 stock index futures, you can ask companies from the island nation to assist you. For the FTSE 100 stock index futures, I will ask FTSE to send someone to assist you. You don't need to worry about the natural rubber futures. I already reached an agreement with Kuala Lumpur's 'Rubber King' Li Laisheng last year. I will communicate with him again later, and he will help contact large rubber companies in Southeast Asia to support our exchange.'

'For the time being, this is all the work. I hope that by the end of the year, our futures exchange will be able to keep up with the pace of the Hong Kong Stock Exchange. Can we do it?'

Wang Qi and Zhao Zhiyuan immediately straightened their backs and looked up, answering in unison, 'Yes!'

Xia Yu nodded slightly and asked again, 'If there's anything else you don't understand, ask me now.'

'Boss...'