"The key to China is Beijing - the regulators,'' said Thomas McMahon, Director for Asia at the New York Mercantile Exchange (Nymex).

"At this point, the regulators are a wall between onshore and offshore trading. So for everybody, it's really about opening up lines of communication.'' Nymex, which opened its first Asian office in January in Tokyo, has had few formal dealings in China apart from a 2004 memorandum of understanding with the Shanghai Futures Exchange (SHFE).

But the world's largest energy-futures exchange, which is planning to open a joint-venture energy and metals marketplace in Dubai later this year, isn't backing away from China.

"The regulators really are the ones that have to give Shanghai the go-ahead to open cross-border trading. When and if those barriers come down, we'll absolutely make it a point to get in,'' McMahon said. The SHFE, with the Dalian Commodities Exchange and the Zhengzhou Commodity Exchange, are the three state-controlled entities that dominate China's futures market.

McMahon acknowledged developments would take time since Asia's oil-futures sector is still relatively immature.

``China and India are becoming such an economic force in this region,'' he said. ``South Korea has completely changed its business model by merging all the exchanges into one group. All that has occurred in the last 18 months.''

McMahon also touched on failed negotiations for a potential partnership with the Singapore Exchange (SGX), which ended inconclusively last month.

``The fact that (negotiations) broke down was really (due to) a lot of things,'' he said. ``Going back to one of the core things that Nymex is, we like floor trading alongside electronic (but) SGX chose to shut down their trading floor operations.

``It changed the face of how the negotiations were going.

``We basically were going to marry into their floor trading operations and coexist so when they started to change their model, it made us take a different look at the entity.'' There were also differences in opinion in terms of whether trade would be cleared by Nymex or SGX, McMahon revealed. Still, he took an optimistic view.

``Going forward from that, it doesn't preclude Nymex from still creating a Singapore-based product. That ability is still there,'' he said. ``The process that ended last month, really we needed some finality to the initial talks. But we have not shut the door by any means.''DOW JONES NEWSWIRES