INTERVIEW: LME electronic trading platform is up to the job, CEO says

The London Metal Exchange’s electronic trading system is up to the job of discovering closing prices with any misalignments to be ironed out via a volume-weighted average price (VWAP) methodology, chief executive officer Matthew Chamberlain said.

LMESelect’s technical functionality had been considered in great detail by the exchange board, acknowledging that outright three-month prices work well electronically but replicating the dates structure can be more complex.
“One big topic that was raised was should we wait to move to LMESelect [version] 10 because we need to turn on more implied prices. But when we did the work, we didn’t see the congestion on the curve or the spread misalignment in conflicts was caused by there being tradable, arbitrageable opportunities,” he told Fastmarkets.
Implied pricing combines liquid outright orders with carry (or calendar spread) orders to create (or imply) new outright orders. Similarly, two outright orders for different prompt dates can combine to imply a new carry order between the respective prompt dates.

“It was about the bid-offer spreads, which don’t add up, but aren’t so misaligned that there’s actually a trading arbitrage – which...

Published

Andrea Hotter

June 08, 2021

19:04 GMT

New York