FOCUS: LME consultation sheds light on electronic trial; but the jury is out

The London Metal Exchange has fleshed out some of the key components put forward in its strategic pathway last September, notably the decision to trial nickel closing prices electronically for three months in the first quarter of 2019, the exchange said in a note to members on August 1.

The trial will see closing prices for three-month nickel contracts determined solely from LMESelect data, as opposed to the actual LME ring, using an electronic volume-weighted average price (VWAP) discovery methodology seen across its LMEprecious offering. In addition, the LME will instigate what it’s calling ‘dynamic instrumentation,’ a period of market engagement that allows the bourse to build wider projects in conjunction with market demand. While the decision has divided market opinion, some see the move as the start of a step away from the LME’s traditional price discovery strategy, inviting more market participants to determine the LME closing price. “It’s an opportunity for the ring to prove its lasting effectiveness for price discovery,” ING commodity strategist Oliver Nugent told Metal Bulletin. “The facts will be on paper, and it...


Hassan Butt

August 06, 2018

12:40 GMT