The London Metal Exchange (LME) has decided on a split pricing structure – with Official Prices to be discovered on the Ring from 6 September.
This pricing structure caters for both smaller physical customers – who use Official Prices in their contracts and overall prefer these to be determined in the Ring – as well as financial and larger physical users, who focus primarily on Closing Prices and generally favour electronically derived pricing.
The consultation on a split pricing approach was launched in June following the results of a discussion paper process on the LME’s market structure, which included the decision to determine Closing Prices electronically on a permanent basis. Matthew Chamberlain, LME CEO, commented: “We believe this split pricing model is the best outcome for the market as a whole, allowing increased participation and transparency in the Closing Price process, while enabling different user groups to access and take part in pricing in the way that best suits their business.”
Split pricing structure - with Ring-based Official Prices and Closing Prices determined electronically
On the basis of eight Category 1 members indicating their support for Ring-based Official Prices, the LME decided to reopen Ring-dealing from 6 September. However, in order to provide market certainty, and having considered consultation feedback, the LME will also introduce its proposed trigger conditions to move Official Price determination to the electronic venue should there be a significant change in liquidity.
Additionally, in line with respondents’ views, participation in Ring sessions – with the exception of the second Ring of the morning (the Official Prices session) – will become voluntary in order to allow Ring teams the flexibility to trade both electronically and face-to-face as best suits their business and clients’ needs.
Gay Huey Evans CBE, LME chairman, said: “Whether sitting in the Ring for Official Prices, or trading electronically from their Ring-side offices for Closing Prices, we are excited to see the Category 1 community return to Finsbury Square in September.”