Regulatory ultimatum on LME warehouse reform is too much, Alcoa tells CFTC

The US regulator has overstepped the mark in attempting to influence London Metal Exchange warehousing reforms, issuing a regulatory ultimatum that prejudices the exchange and prevents third parties like Alcoa from participating in a meaningful process, the US lightweight materials firm said.

In a letter to Commodity Futures Trading Commission chairman Timothy Massad, Alcoa general counsel Max Laun said that efforts by the regulator to influence the operation of the LME aluminium futures contract as well the exchange’s network of warehouse operations had gone too far. He was referring to a leaked letter from the CFTC to the LME showing 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 that letter, the CFTC offered the exchange its opinion of the reforms, including that the possibilities of capping or banning rents and inducements “show promise”. The LME has since proposed to implement queue-based rent capping, saying that it has “significant support” from regulators in the USA, and...

Published

Andrea Hotter

August 05, 2015

10:00 GMT

New York