London 19/02/2015 - The LME has relaxed its trade ratio policy to increase liquidity in its Third Wednesday contracts, it said.
With effect from March 16, order actions for the first six tradable outright third Wednesday months for full-sized contracts for aluminium, copper and zinc on LMEselect will be excluded from the policy, the exchange said on Thursday.
When the three-month prompt date is the same as the third Wednesday of the month, order actions for the three-month prompt date will also be excluded from the policy on this date, it added.
Earlier this year, the exchange proposed moves to increase participation and liquidity on its forward monthly contracts in response to the broad-based interest it received from would-be users.
At present, the LME operates an order-to-trade ratio of 50:1, meaning that one lot must be executed for every 50 order-entry actions by an LMEselect participant. This restricts market-makers in illiquid markets when initial trade volumes could be low - users would be charged for breaching the ratio.
"The move is expected to encourage greater participation by members and clients, which the LME believes will increase the liquidity in outright Third Wednesday contracts as part of the roadmap," it said.
Following a consultation, the LME received six responses, which were generally in favour of the proposed amendment to the policy.
(Editing by Mark Shaw)