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The London Metal Exchange (LME) will retain traditional open-outcry trading for closing prices after largely negative feedback from members about a trial that used electronic final prices.
The announcement by the LME confirmed a Reuters story last year that quoted industry sources saying that the electronic trial of the benchmark nickel contract failed to boost volumes and lacked support from members.
“Many respondents took time to state their general concerns about the LME moving away from ring pricing and towards electronic reference prices,” the 143-year-old LME said in a statement on Wednesday.
The ring is the last open-outcry trading venue in Europe and some members feared that a successful nickel test would reduce the ring’s importance.
The ring is the last open-outcry trading venue in Europe and some members feared that a successful nickel test would reduce the ring’s importance
The LME had thought that the three-month trial, which moved nickel from the ring to digital trading, could spur greater participation in the setting of closing prices.
The LME, owned by Hong Kong Exchanges and Clearing, said it would not change the closing price process but would retain the “trade-at-settlement” order book introduced during the trial.
During a consultation period, some LME users said it was difficult to obtain guaranteed execution against closing nickel prices when the electronic system was used.
“Several members reported seeing reduced client interest in the nickel closing price due to the lack of guaranteed closing price orders,” the LME said.
Others, however, were more positive, saying that electronic closing prices boosted transparency.
The exchange, the world’s oldest and largest market for industrial metals, did not rule out future changes.
“The LME … will continue to work with stakeholders to evolve these processes where necessary, which may include further trials and/or enhancements to the price discovery processes,” the statement said.
(By Eric Onstad; Editing by David Goodman)
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