London Metal Exchange to extend open-outcry trading

Aug 14, 2019
Move comes after zinc trial showed increase in trading volumes

The London Metal Exchange (LME) is set to double its final open-outcry trading sessions from five minutes to 10, following a successful trial for zinc. 

The move by the 142-year old LME – the world’s oldest and largest market for industrial metals – follows a three-month trial for zinc, which resulted in a 57 percent average daily volume increase over the period before the trial. It will be made permanent for zinc as well as being extended to copper, lead, nickel, primary aluminum and tin, from September 23, according to the LME.

The LME, famous for its ‘ring’ of red leather sofas, remains the last open-outcry trading venue in Europe, with traders using hand signals in five-minute bursts of concentrated trading. 

The exchange, which is owned by Hong Kong Exchanges and Clearing, ‘believes that the longer kerb period for zinc has provided market participants who use the ring with more time to place orders and then to react to price moves in the ring, with the ability to place counter orders,’ it says in the results of the trial.

While other exchanges across Europe have dropped open-outcry trading in favor of electronic trading, a separate LME trial with nickel, designed to test a potential move to electronic closing prices, showed little difference between electronic trading and open-outcry, though the LME did note that ‘the temporary nature of the trial’ might not reflect the outcome of a permanent move. It also noted the potential ‘loss of the ring brand value if it is no longer the venue for price discovery.’

A spokesperson for the exchange says that the trials are designed simply to allow the LME to make an ‘informed, balanced decision’ on how to proceed and that further information will be shared at the end of September following the market engagement period. 

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