The London Metal Exchange and LME Clear have published a discussion paper to solicit feedback on a wide range of issues related to its core markets in non-precious metals, including trading and booking structures, clearing structures and services, delivery and physical market structure, membership and the LME ecosystem as a whole.
LME will engage with market participants through a series of briefings and gather written feedback until June 30. After analyzing the feedback, LME intends to publish an outcomes document that will articulate its strategic direction. This document is expected in the fall.
“Our core strategic vision is to work with our members to make LME trading more accessible and efficient, while fully respecting our physical roots,” said Matthew Chamberlain, LME’s newly appointed CEO. “This paper lays out the principles on which we plan to build our business, and invites feedback from all stakeholders on the routes by which we deliver that strategic vision.”
The 50-page discussion paper puts forward a long list of questions on key issues facing the exchange, including whether to preserve the date structure for its contracts or move towards the futures model of monthly contracts; how to deal with high-frequency traders and whether it should introduce “speed bumps” to mitigate the advantages of execution speed; possible changes to its trading and clearing fees; and many other issues related to its market structure.
The paper also raises several issues related specifically to clearing, including a possible transition from SPAN to VaR margining methodology, the creation of different types of client accounts based on gross rather than net margining, and the introduction of an additional OTC clearing service.
