LME Launches Discussion Paper on Potential Warehouse Rule Enhancement

SEATTLE (LME): The London Metal Exchange (LME) is today launching a discussion paper and market-wide engagement process, setting out proposals from the LME Warehousing Committee designed to enhance the efficiency of the LME warehousing network, and create further opportunities for metal owners to make use of LME warranting.

Since 2013, the Exchange has led an ongoing warehouse reform process, aimed at tackling structural warehouse queues, and ensuring that the warehouse network meets its core role of settlement and price convergence for LME contracts. The Exchange is confident that this delivery function operates effectively, and current stock levels are more than sufficient to facilitate the daily settlement of its forward market.

However, the LME is also aware that LME warranting is used more broadly by metals market participants seeking to store and finance metal, many of who believe that liquidity and transparency would be enhanced by higher stock levels. In addition, warehouse companies have asked the LME to consider changes to its rules in order to enhance usage of the network.

As a result, the LME tasked its Warehousing Committee with identifying proposed modifications and potential proposals. The LME has compiled these proposals into a discussion paper and is now seeking market-wide feedback.

Commenting on today’s announcement, Matthew Chamberlain, LME CEO, said: “The LME is committed to ensuring the smooth and orderly operation of its physical delivery function. However, if our industry can collectively identify rule modifications which enhance the attractiveness of the LME warehouse network while retaining appropriate protections for physical market participants who receive warrants in LME settlement, then the LME will facilitate such changes."

Courtesy: https://www.lme.com