London 23/06/2014 - The LME (London Metal Exchange), the world's largest non-ferrous metals market, on Monday gave a 'thumbs-up' to maintaining ring trading, and is looking to expand business and attract new participants to what is Europe's last open-outcry floor.
"We want to make sure that all of our venues (floor, electronic platform, telephone) are deep and liquid and linked to each other. We are not looking to favour one over the other," Garry Jones, CEO of the LME and Co-Head of Global Markets at Hong Kong Exchanges and Clearing (HKEx), said in an interview.
The 137-year old LME is the world's largest non-ferrous metals market. In December 2012, it was formally taken over by HKEx for 1.388 billion pounds. At the time, HKEx made commitments to retain floor trading, daily prompts and physical delivery only up to the start of 2015.
Now, the LME intends to maintain and further invest in the floor beyond the beginning of 2015, following a six-month internal review and extensive discussions with market participants - more than 25 stakeholders participated in the review, including all 11 ring-dealing members and several industry trade bodies.
“The LME will continue to host the ring, with its robust and transparent price-discovery process, for as long as the market needs it,” Jones said.
He added that the review and subsequent statement of intent regarding the open-outcry floor would allow proposed new contracts to not have only an electronic focus.
"We are looking at our steel franchise - that is a ring (market) and the premium hedging contracts."
As well, this decision could see further additions to the ranks of RDMs (ring-dealer members) - numbers have fallen in recent years.
"We have had a lot of interest, and it was important that we got this (decision) out, so people, with business plans can consider the next step," Jones added.
MAJOR INVESTMENT
This year, the LME is investing one million pounds into ring-based technology, as new wall boards will be fitted on the trading floor with enhanced technology to help integrate ring and LMEselect pricing, as well as facilitate business conducted on the floor.
"It is a long-term contract here and we have no plans to move to another venue, although we do keep that under review."
Since 2010 the LME has introduced more than 20 new rules to ensure that its price discovery process remains as efficient as possible, and in 2013 it doubled the seating capacity for ring-dealing members to cater for floor teams.
The LME added that an internal audit showed that the ring meets the IOSCO Principles for Financial Benchmarks - it will continue to conduct internal and external audits on all its trading operations on an ongoing basis.
"It is vital that it meets that (IOSCO). These are real transactions, taking place in real-time and they can be audited and verified," Jones said.
(Editing by Eddie van der Walt)