LME will reopen ring in September

The London Metal Exchange (LME) will reopen its open-outcry ring trading floor on 6 September, reversing earlier plans to close the floor and permanently move the exchange's official pricing session onto electronic platforms.

The LME temporarily moved all pricing operations onto electronic platforms in March last year in response to the Covid-19 pandemic, and the ring has been closed ever since. The LME launched a consultation last year to decide whether to close the ring permanently and looked set to confirm that proposal in January this year.

But strong reactions from market participants other than financial institutions has stayed the LME's hand, and the exchange has now decided to reopen the trading floor and continue to discover official daily prices through the open outcry format.

But the LME's closing prices at the end of the day will continue to be set on electronic platforms, to better serve the financial community that is more concerned with closing prices and the forward pricing structure that comes with them in aluminium and copper markets. Official daily prices produce cash and three-month prices that are most important for the physical buying community, and so will be discovered in the ring.

The LME is launching a closing prices consultation group to optimise its methodology under the electronic format, with any changes to be implemented next year.

"We're very conscious of the feedback we received over our closing prices, and that they could become more complex and more congested now they are not on the ring," chief executive Matt Chamberlain told reporters. "But the ‘democratisation' is the key factor, and the biggest users of closing prices prefer the electronic platform."

Chamberlain did not rule out looking again at the ring trading format in the future, but expressed a strong desire to maintain ring traders' business models after their category 1 members were largely responsible for keeping the market and the exchange liquid through the Covid-19 pandemic.

"We can't, in an evolving world, expect to continue being the market of choice if we don't look to the future and its needs," he said.

By Jethro Wookey