Asian Commodity Exchanges: Time to Move Beyond the Western Mould

The rise and fall of various Asian commodity exchanges over the past two decades tell a compelling story of ambition, missteps, and untapped potential. While the West, with its deeply entrenched financial markets, has set global standards, Asia—despite being the largest consumer of many commodities—has yet to establish a dominant homegrown trading ecosystem that reflects its own economic realities. Instead, most Asian exchanges have merely mirrored Western models, often struggling to sustain liquidity and relevance.

This article takes a dive into some of the prominent commodity exchanges across Asia, their trajectories, and the urgent need for region-specific financial products.

1. JADE – Joint Asian Derivatives Exchange (Singapore)

Launched in 2006 as a collaboration between the Chicago Board of Trade (CBOT) and the Singapore Exchange (SGX), JADE aimed to be Asia’s premier commodities derivatives platform. It primarily listed rubber futures, a key commodity for the region. However, the exchange failed to gain traction, facing stiff competition from established players like the Tokyo Commodity Exchange (TOCOM) and Shanghai Futures Exchange (SHFE).

By 2008, SGX shut down JADE, absorbing some of its contracts into its own platform. The lesson from JADE? Simply transplanting Western market structures without ensuring localized participation and market relevance is a recipe for failure.

2. SICOM – Singapore Commodity Exchange

SICOM was originally set up in the 1990s to trade rubber and other agricultural commodities. It eventually became part of the SGX and remains a niche marketplace for rubber futures. The exchange has not expanded beyond its core offering, reflecting a conservative approach. While it continues to serve rubber producers and traders, SICOM’s impact on the broader Asian commodity market is limited.

3. SMX – Singapore Mercantile Exchange

SMX was an ambitious attempt by India’s Financial Technologies (FTIL) to establish a global commodity trading hub in Singapore. Launched in 2010, SMX aimed to offer trading across multiple asset classes, including energy, metals, and agriculture.

However, regulatory scrutiny following the National Spot Exchange Limited (NSEL) scandal in India led to its downfall. FTIL was forced to exit, and the exchange was acquired by ICE (Intercontinental Exchange), effectively ending its independent operations.

This case highlights how regulatory missteps and lack of trust in governance structures can quickly erode an exchange’s credibility.

4. HKMEx – Hong Kong Mercantile Exchange

HKMEx was launched in 2008 with high aspirations of becoming Asia’s premier commodities trading platform. Despite support from prominent business figures and the Hong Kong government, it failed to generate the necessary liquidity. Its gold futures contract could not compete with the established benchmarks of COMEX or the London Bullion Market Association (LBMA).

In 2013, HKMEx was forced to shut down due to financial irregularities. The key takeaway? A well-intentioned initiative without sufficient market participation and trust will not survive.

5. ICEX – Indian Commodity Exchange

ICEX was an attempt to create a robust multi-commodity exchange in India. It gained attention for launching the world’s first diamond futures contract, an innovative product tailored to the Indian market. However, ICEX struggled with liquidity issues and eventually merged with NSE’s commodities division.

The ICEX case underscores a critical point: innovation alone does not guarantee success. Market depth and participation are equally important.

6. NMCE – National Multi Commodity Exchange (India)

NMCE was one of India’s earliest electronic commodity exchanges, founded in 2002. Despite initial success, it could not compete with the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX). After years of declining market share, NMCE merged with ICEX in 2018.

This reinforces the trend that in Asia, newer exchanges struggle against dominant incumbents, making market positioning crucial.

7. National Spot Exchange Limited (NSEL) – India’s Cautionary Tale

NSEL was established in 2008 as a national-level spot exchange for agricultural and other commodities. However, it soon became infamous for its massive fraud case in 2013, where settlement defaults exposed systemic weaknesses and regulatory loopholes. The scandal led to a complete halt in operations and stringent reforms in Indian commodity trading regulations.

The NSEL crisis highlights the necessity of robust oversight and the dangers of speculative trading without proper risk management frameworks.

8. TOCOM – Tokyo Commodity Exchange

TOCOM was once Asia’s leading commodity exchange, particularly in rubber, gold, and crude oil futures. However, it struggled to compete with regional exchanges like SHFE, which benefited from China's large domestic market. In 2020, TOCOM was integrated into the Osaka Exchange, reflecting the difficulties even well-established Asian exchanges face in sustaining liquidity.

9. LME’s Failed Gold Venture

The London Metal Exchange (LME) attempted to enter the gold futures market in 2017, seeking to challenge the dominance of LBMA and COMEX. However, despite its global reputation in base metals, LME Gold failed to gain traction and was eventually withdrawn. This demonstrates that even Western exchanges find it difficult to break the stronghold of entrenched liquidity pools in gold trading.

Asia’s Commodity Markets Need Indigenous Solutions

The common thread across these failed or struggling exchanges is their attempt to replicate Western models without addressing Asia’s unique economic structures, consumption patterns, and regulatory landscapes.

Why Asia Needs Custom-Designed Commodity Exchanges

1. Commodity Flows Favor Asia – Asia is the world’s largest consumer of commodities like gold, crude oil, and base metals. Yet, price discovery remains dictated by Western exchanges such as COMEX, LME, and NYMEX.
2. Regulatory Fragmentation – Unlike the U.S., which has a unified regulatory framework, Asia has multiple jurisdictions with varying levels of market development, making it harder for exchanges to thrive across borders.
3. Physical Delivery Matters – Western exchanges thrive on paper contracts, but in Asia, actual physical delivery of commodities is critical. Future exchanges must integrate strong warehousing and logistics networks.
4. Cultural and Trading Practices – Asian traders often prefer customized contracts, different settlement mechanisms, and risk hedging strategies that differ from their Western counterparts.

The Way Forward: Building a Robust Asian Commodity Market

For Asia to become a true commodities trading powerhouse, new exchanges must:

• Prioritize local demand: Develop products based on regional consumption and production patterns.
• Ensure strong governance: Regulatory oversight must prevent fraud while enabling market growth.
• Foster liquidity: Encourage participation from producers, consumers, and investors.
• Enhance cross-border integration: A pan-Asian approach with harmonized regulations can help create deeper markets.
• Develop innovative contracts: Move beyond mirroring Western contracts and offer tailor-made instruments.

Conclusion

Asian commodity exchanges have immense potential, but their success depends on moving away from Western blueprints. Instead, they should focus on localized solutions that address the region’s economic realities. With strategic planning, better governance, and deeper market participation, Asia can finally take control of its commodity price discovery, ensuring long-term financial stability and market growth.

With the emergence of GIFT City, India now has a unique opportunity to develop Asia-centric commodity exchanges. GIFT City, being a special economic and financial hub, can facilitate the creation of innovative derivative products and spot markets that align with Asia’s unique needs. By leveraging its regulatory flexibility, tax incentives, and proximity to key Asian markets, GIFT City can attract liquidity and serve as the cornerstone for a truly regional commodity trading ecosystem—one that is no longer just a reflection of Western financial interests, but a robust, self-sustaining marketplace for Asian economies.