The London Metal Exchange will go ahead with planned reforms that seek to funnel more trading onto its electronic system to boost liquidity, it said on Friday.
The exchange, the world’s oldest and largest market for industrial metals, decided to adopt all the measures that were introduced last September, with some modifications after consultations.
The 148-year-old LME plans to implement them in February and March next year, it said in a statement.
A key element of the new measures is moving small block trades – privately negotiated deals with brokers over the phone – to the LME electronic system to increase volumes on a single date per month.
Most futures exchanges have a single expiry date for monthly contracts, but LME users can trade every day, which enables physical users to tailor their deals to metal deliveries.
The LME, owned by Hong Kong Exchanges and Clearing Ltd. 0388.HK, argues that this system often dilutes liquidity over many dates and the reforms will help focus some of it.
Some LME participants, however, were sceptical about the reforms.
One executive at an LME broker expressed doubt that the reform would increase liquidity.
A trader at another LME member firm said: “I think they are deliberately hurting the bank/broker member models in search of some business that doesn’t exist.”
Another reform is about private deals, known as over-the-counter trades, which the LME had said in September it wanted to move onto its electronic trading system.
In April, however, the exchange dropped those proposals and said it would instead raise fees for those contracts that use LME prices.
On Friday, it confirmed that decision and published new fees that will apply from October, and which will more than double to $4.72 per lot from $2.24.
The proposed block trade rules, which allow larger trades to be privately negotiated because they might move the market if they are displayed publicly, are in line with other exchanges, the LME has said.
The exchange said previously that the new proposals would not affect its open-outcry floor, one of the last such venues in the world, which is often used for physical trades.
