The London Metal Exchange (LME) has launched a month-long consultation on proposals designed to broaden access to its electronic trading platform, LMEselect.
The changes put forward include opening up LMEselect access to category 3 and category 4 members of the Exchange as well as adding flexibility to the criteria required to apply for LME membership.
“Today’s proposals are crucial to our overarching aim to maximise liquidity and participation on the LME,” says Garry Jones, LME CEO. “Opening up access to trading on LMEselect is beneficial to everyone trading on any one of our venues as it will bring more liquidity and price transparency to all.”
Adding flexibility to the application criteria for LME membership means that prospective members may, in some cases, benefit from exemptions from the UK Financial Conduct Authority (FCA) authorisation requirements, which represents a significant step in the LME’s Liquidity Roadmap. The changes would make the LME electronic market more attractive to non-UK based traders who are keen to take advantage of the Exchange’s enhanced liquidity initiatives but who are currently not eligible or are discouraged by electronic access restrictions.
Following the planned upgrade to LMEselect in April, the LME is also introducing a pre-trade risk management (PTRM) component, which will monitor all orders entered into the LMEselect platform. The tool provides LME clearing members the ability to set a variety of risk limits for their own traders and for clients submitting orders onto the electronic platform.
“LMEselect’s PTRM tool gives risk managers robust and efficient control over trading limits, which is crucial as we consider broadening electronic access and relaxing membership criteria for category 3 and 4 members,” said Garry Jones. “This is a key element of our Liquidity Roadmap as it makes the LME an even safer place to trade, positioning us well for upcoming EU regulatory requirements for stricter pre-trade processes.”
In addition, today’s consultation also sets out proposals to adjust the LME Rulebook to allow for the implementation of incentive schemes for trading. The LME plans to introduce volume discount schemes, in particular to further enhance liquidity on the ‘third Wednesday’ date, which will be implemented following regulatory approval and the required rulebook changes.