LME initial margin cut could save members 'billions of dollars' but CME still cheaper

London Metal Exchange members could save vast sums of money – as much as billions of dollars – if UK regulators approve a cut to its initial margins (IMs), sources claimed.

The LME has not disclosed the size of its proposed cut to margins calls – the amount of money/collateral called by the clearing house for the purpose of insuring against loss on an open position – but it is likely be a reduction of around 30% from current levels, several sources told Metal Bulletin.
The IM rates are updated monthly – for September, aluminium was $3,400 per 25-tonne lot and copper $12,800 per 25-tonne lot.
"I heard that it would be a 25-30% cut," a senior category I member said. "Will it be welcome? Sure. But I'm not convinced it will be enough to alter the client mindset."
A second member also confirmed talk of a 30% cut, while a third said that this figure sounds realistic.
The exchange has had several meetings with the Bank of England (BoE) and hopes to make an announcement shortly, Metal Bulletin understands.

Published

Kathleen Retourné

October 14, 2016

10:58 GMT

London