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The London Metal Exchange unveiled a set of proposed measures on Wednesday designed to boost electronic trading while also protecting its complex structure used for deals in physical metal.
The measures attempt to navigate a recurring tension between traditional physical users on the LME’s open-outcry trading floor and the financial community which prefers electronic trading.
The exchange released a white paper detailing a liquidity provider programme, the introduction of block trade thresholds, new trading functionality and market data changes, it said in a statement.
The exchange, the world’s oldest and largest market for industrial metals, said block limit rules would mean that small-sized trades on monthly dates would have to be executed on its electronic LMESelect system.
“These future-focused measures… seek to grow participation in our markets, and make our prices as representative and accessible as possible, while continuing to support physical market trading practices,” Chief Executive Matthew Chamberlain said.
Key outcomes would be improved bid-offer spreads and better execution for clients, the exchange said.
The LME, owned by Hong Kong Exchanges and Clearing Ltd. 0388.HK, said the new block limit rules would not apply to deals using the LME’s daily prompt dates mainly used by physical users, such as miners and industrial consumers.
The LME’s new version of its electronic system, which has been released for member testing, will increase functionality for electronic traders, it said.
Many physical deals are executed in the LME’s ring, one of the last venues in the world to use open-outcry trading.
The future of ring trading looked secure after nearly all of the seven remaining firms participating on the floor recently told Reuters they remained committed to the age-old practice.
Three years ago the 147-year-old exchange proposed to close the trading floor and join the bulk of other financial exchanges that have moved to pure electronic trading, but an outcry from physical LME users saved the ring.
LME now operates on a hybrid basis, using open-outcry trading for official prices used by physical users as benchmarks for their deals and an electronic system for closing prices.
(Reporting by Eric Onstad; editing by Jason Neely and Christina Fincher)
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