In an emailed letter sent on June 8, Alcoa used the Freedom of Information Act to request information and records pertaining to the LME’s application to be a foreign board of trade, along with its network of approved warehouses, queue lengths and its reform package.
The move came after a leaked letter from the Commodity Futures Trading Commission (CFTC) to the LME revealed that the regulator had deferred its review of the exchange’s application to register as a foreign board of trade while it evaluated the LME’s warehouse reforms.
In the letter, the CFTC offered the exchange its opinion of the reforms, including that the possibility of capping or banning rents and inducements “show promise”.
“Staff will also continue to evaluate and discuss with you the implementation of additional alternatives which have the greatest potential to timely reduce the queues at LME-licensed aluminium warehouses, particularly in Detroit,” the CFTC letter said.
Alcoa has met the CFTC three times to discuss the matter. So far, the CFTC has yet to provide any explanation for the view it has taken concerning the LME’s proposed rule changes.
The LME has not yet announced its decision on whether it will cap or ban rents in queues but recently conducted a consultation with the industry over the matter. The LME – which declined to comment on Alcoa’s request to the CFTC – needs to register as a foreign board of trade to access its electronic platform LMESelect from the US.
Alcoa confirmed its request to the regulator.
“Our goal is to learn the extent to which the CFTC has engaged in substantive discussions with the LME as the LME considered and adopted rule changes that impact the aluminium market in order to influence aluminium pricing,” the company said in a statement.
“We believe that the CFTC should refrain from any comment or judgment on, or interference with, LME rule changes, and that the CFTC should examine any LME aluminium contract performance issues only through an open, inclusive and transparent process where all affected market participants have the opportunity to present their views,” Alcoa added.
The CFTC had not responded to a request for comment at the time of going to press.