According to reports, several global base metals brokers are engaged in discussions with the former CEO of London Metal Exchange on the subject of starting a new trading platform as an alternative to the LME.
Several “high-profile LME Category One” traders are believed to be in support of the initiative, which is likely to be spearheaded by former LME CEO Martin Abbott.
“There have been lots of conversations, some of them I have been in, some I haven’t, but we have created a study group and now invite people to see if indeed there is sufficient appetite,” explained Abbott.
According to the report, higher trading costs at the LME is the main catalyst driving the push for a new trading platform. Several members have gone on record in recent weeks and months stating that higher costs have negatively impacted their businesses – some even claiming the higher costs have forced them into changing their business models. Backers are now investigating the possibility of initiating a feasibility study.
The new platform may feature a re-mutualized exchange set-up for trading. The exchange would be funded by the metal community itself.
“There is certainly more dissatisfaction with the LME and its fee structure and general attitude than I can ever recall. Much of this is focused solely on the fee structure, which is forcing members to pass on many more if not all of the costs to clients,” said Kingdom Futures’ Malcolm Freeman.
“Added to this the cost of credit due to regulatory capital requirements/cost of capital and it seems to many clients that alternatives to the LME will have to be sought,” he added.
The current plan for the proposed new exchange platform is one that offers electronic and telephonic trading at a lower fee than that of the LME. The structure is intended to be based upon the LME’s prompt date structure. The platform will be designed to comply with EU guidelines like Mifid as well, sources said.