LME Pushes For New Product Launches, Reduced Fees and Added Enhancements

SEATTLE (Scrap Monster): The London Metal Exchange and LME Clear announced a series of steps in line with its strategic development programme, including reduced fee structure, new product launches and enhancements to existing services. The strategic pathway delivery programme announced yesterday also promises trading efficiencies for its members.

Matthew Chamberlain, London Metal Exchange CEO noted that battery metals suite which currently has contracts in copper, nickel, aluminum and cobalt will be expanded by inclusion of new contracts such as lithium and cobalt sulphate. Meantime, Adrian Farnham, LME Clear CEO stated that the enhancements would provide more fairness and flexibility to members.

In an effort to lend support to the physical market and stimulate volumes on the exchange, the LME had introduced reduced fee structure for short-dated carry trades effective October this year. As an extension, the fee reduction will be made applicable for medium-dated carry trades from November 1^st. Further, LME will hold consultations with market participants on the proposed introduction of a fair financial OTC booking fee in mid-November, the final implementation of which is scheduled for early next year.

During the first half of 2018, LME plans to expand its membership base by including introducing brokers, which in turn will boost the growth of new products. It also plans to prioritize the value of members’ B shares. To support user choice and trading efficiency, LME will introduce an optional T2 booking model, which it hopes to offer more standardized and efficient execution method.

In H2 2018, LME plans to introduce trade-at-settlement (TAS) functionality on LMEselect, which will allow LMEprecious reference prices to be traded electronically. Further, LME looks forward to expansion of four product groups by launching a number of new contracts. On account of continuous demand from market participants, LME will include gold and silver options in LMEprecious suite. Also, LME announced that platinum and palladium futures will soon follow suit. The LME ferrous suite will see addition of a set of regional hot-rolled coil (HRC) contracts, whereas the aluminum suite will be enhanced through addition of regional cash-settled aluminum premium contracts and alumina.

Going forward, LME plans to reduce margin levels by transitioning to a Value-at-Risk (VaR) initial margin model. The other enhancements in pipeline include provision of a separate dealer-to-client platform and delivery of LME’s central electronic trading platform by 2020-21.