LME Declares Launch of Implied Pricing Mechanism for Base Metals

SEATTLE (Scrap Monster): The London Metal Exchange (LME) has announced its decision to implement implied pricing functionality, as part of the scheduled upgrade of the LMEselect trading platform. The new functionality, viewed as an attempt to offset increasing competition from other exchanges operated by CME Group, will go into effect from 30 July, 2018. Initially, the service will be available for six main base metals- copper, aluminum, zinc, lead, nickel and tin.

According to LME, the implied pricing will combine the liquid 3-month outright order book with the calendar spread order book, in order to create the most competitive monthly outright orders in both the month before and the month after the rolling three-month date. It will bring greater on-screen execution opportunities on monthly outright dates. Consequently, market participants will be able to see and access previously latent liquidity on monthly dates through LMEselect from July 30 onwards.

The LME intends to enable certain “routes” to implied pricing for the above mentioned six main base metals. Implied prices will show the best bid and the best offer for each implied route. The performance of the outright pricing will be kept under constant review, in order to ensure that it operates for the benefit of market participants.

Matthew Chamberlain, CEO, LME stated that implied pricing delivers a new way to access existing monthly liquidity. This additional option will appeal to fundamental financial investors not currently accessing LME markets. They will now have the opportunity to view quoted prices on screen. There will be no specific financial incentivisation to trade the implied monthly prices, Chamberlain added.