HOTTER ON METALS: LILO dispute highlights flaw in LME warehouse rules

When the London Metal Exchange amended its policies related to its physical delivery network a few years ago, it overlooked one key thing.

The issue centers on LME’s linked load-in/load-out (LILO) rule, which operates by linking the amount of metal a warehouse loads in to the amount it is obligated to load out for warehouses that have queues of over 50 days. The rule changes were part of package of reforms that arose following lengthy queues to access metal from warehouses in the exchange’s approved delivery network. What the LME did not think about was LILO in the context of a warehouse that did not have queues. It also did not write an anti-abuse clause for LILO, although it did write one for Queue-Based Rent Capping (QBRC), another rule introduced as part of the reforms. Over five years...

Published

Andrea Hotter

March 15, 2019

01:28 GMT

New York