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Speculation is mounting that the co-owners of Joint Asian Derivatives Exchange (JADE) may be preparing to cut their losses on the struggling project and shut up shop. Fuelling the conjecture is the fact that Singapore Exchange (SGX) managing director, Chong Kim Seng, has departed the exchange with no replacement currently being sourced and that other staff at the commodities platform have been reassigned to roles within SGX. A source at JADE however told FO Week that closing operations were not currently up for discussion. Neither of the two contracts listed on JADE, rubber and crude palm oil (CPO), have seen significant trading volume since their respective launches on 25 September 2006 and 3 May this year. CPO open interest stood at 170 contracts on 6 September, with rubber even lower at just 28.Despite high hopes for the CPO contract and promises of more products to be listed on the exchange, JADE has struggled to build credibility since its plans to launch with a CPO future were aborted after a licensing deal with Bursa Malaysia (BM) failed (see FO Week 17/07/06). The replacement first contract, rubber, has never been viewed as a likely mass market and the eventual listing of CPO may have come too late to save the fledgling exchange.One senior Asian-based FCM executive told FO Week that JADE has become “something like an embarrassment” to its owners, SGX and CME Group, which acquired its 50% stake in the exchange when it took over Chicago Board of Trade.Other sources are prepared to speculate that CME Group management may be less inclined than CBoT to continue to support the joint venture project. “With two failed contracts under its belt and the MD now apparently being let go, where is there for JADE to go?” asked one Singapore-based trading firm source. “One cannot help but wonder if it is because CME is now running the show.”As with other exchange competition experiences, JADE has also faced vigorous defence of a franchise from a rival, in this case BM. The Malaysian exchange is finalising plans to introduce a dollar-denominated CPO contract and to offer direct market access which, together with its already-existing liquidity pool in the commodity market, many observers believe may be enough to see off the threat of JADE.BM could not be contacted to comment on the possible closure of its rival.
Additional reporting by Paul Francis-Grey
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