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2014 FORECAST: Credit block is key threat to LME
January 02, 2014 - 15:36 GMT
The London Metal Exchange’s position as the pre-eminent metals exchange rests on several key factors. These look set to come under pressure in 2014.
At the core of the London Metal Exchange’s
position as the pre-eminent metals trading exchange are a few
key factors that differentiate it from its peers. These include
its open outcry trading floor, or the ring; its unique
prompt-dates structure; the extensive warehousing system; and
the fact that brokers can grant free credit to their clients.
No other exchange with metals contracts has all of these
components at its core. Yet 2014 will see pressure on the
136-year-old exchange crank up. Credit Perhaps the biggest
threat to the LME's standing next year will be
the weakening of the ability of brokers to grant credit.
It has been an essential part of clients’ trading
models and helps to keep volumes, and therefore liquidity, at
elevated levels. But regulatory changes will hit brokers hard.
Former LME ceo Martin Abbott warned at Cesco in April that the
widespread practice of providing free credit lines...
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Euromoney Institutional Investor PLC.
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