Hong Kong Exchanges Clearing Ltd (0388.HK) (HKEx), which operates Asia's largest bourse, is forming a joint venture with mainland Chinese exchanges to develop index-linked and equity derivatives products in a sign of growing cooperation in the region.

After almost a year of talks, the HKEx announced the collaboration with the Shanghai Stock Exchange and the Shenzhen Stock Exchange - just days after it made its first overseas move by agreeing to buy the London Metal Exchange for $2.2 billion.

The tie-up with the mainland also comes amid a wave of initiatives launched by Beijing aimed at making southern China a major financial center, including plans to develop a $45 billion hub in Shenzhen's Qianhai Bay Economic Zone and push towards a freely tradable yuan.

The three Chinese exchanges began discussing closer ties at a time of feverish global stock market consolidation, though few of those deals managed to get past regulatory hurdles.

KEEPING TRACK

One challenge global investors face when tracking Chinese markets is having to keep check on multiple benchmark indexes. The new venture plans to launch indexes that better represent the cross-border nature of the market and will be responsible for licensing index-linked products such as ETFs.

Despite rapid economic growth, Chinese stock exchanges have a long way to go before establishing a global presence.

The total value of shares traded on the three stock exchanges last year was $7.9 trillion, less than half the volume on the New York Stock Exchange (NYX.N), according to the World Federation of Exchanges.

John Tseng, Financial Secretary of Hong Kong, told a briefing on Thursday that the joint venture was "a new landmark in financial cooperation between mainland China and Hong Kong".

The venture partners will have equal shares in the company, each committing HK$100 million ($12.9 million) as initial paid-up capital.

This article is copyrighted by Reuters