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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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