The Board of the London Metal Exchange (LME) has taken decisive steps for the market's future with an agreement for the Exchange to pursue self clearing of trades and to increase revenue through a new charge on client contracts.
LMEclear, as the Exchange’s new clearing house will be known, offers to members and shareholders all the strategic and financial advantages of clearing the LME’s own business.
The Board also agreed a new Exchange User Fee for members to levy on client trades. The revenue from the new levy will enable the Exchange to continue to operate commercially while still operating a highly competitive service.
"The Board is securing the future of the LME as the world's largest metals market," said LME chief executive Martin Abbott.
The LME will begin a tender process for suppliers of technology and treasury for LMEclear. It will also finalise the financing for the project.
The new Exchange User Fee of 50 pence per lot takes effect from 1 March. It is anticipated that members will pass the cost on to customers directly.
These two initiatives enable the Exchange to maintain its leading position in the market. Trading volumes for 2011 are up 23 percent on 2010, itself a record year when 120 million lots traded.
The Exchange engaged Moelis & Co in September to advise on future strategy, either as a fully resourced and strong, independent entity or as part of a larger group. Potential suitors are preparing bids for the Exchange but it is too early to say whether the Board will recommend any bid to the shareholders.
