The merger with the Shanghai Commodities Exchange and the Shanghai Cereals and Oils Exchange would form the Shanghai Futures Exchange which would have a new trading centre in Shanghai's new financial district in the Pudong Development Area, said Zhou Xiaohong, chairman of the metal exchange.

Three contracts - copper, aluminium and rubber futures - had been approved by the China Securities Regulatory Commission, and the first new contract on the combined exchange would be the September 1999 contract, she told a weekend base metals conference.

Staff at the Shanghai Futures Exchange would be reduced by about half from current combined levels to around 150, she said.

About 250 member firms were expected to have seats on the new exchange. With each seat valued at 500,000 yuan ($60,386), the exchange would becapitalised at 125 million yuan, she said.

The exchange fee on each trade has been set at 0.02 per cent of the contract value, Zhou said.

Besides the Shanghai area, the new exchange has tentatively decided to maintain warehouses in Guangzhou, Tianjin, Shenyang and Chongqing, she said.Zhou did not discuss the prospects of the Shenzhen Mercantile Exchange, which has until recently competed with Shanghai in making a market in metals futures.

In a move to tighten regulation over China's futures trading, government regulators have ruled that only three of the nation's 14 futures exchanges would be allowed to remain in operation next year. In addition to the Shanghai Futures Exchange, the other two surviving exchanges are in Dalian in the northeast and Zhengzhou in central China.