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LME Looking Into Changing Strategy After Market Share Drop

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(Kitco News) -LME Looking Into Changing Strategy After Market Share DropThe London Metal Exchange (LME), the world’s biggest industrial metal exchange, will be voting on various new measures in August, including items such lower fees and new live implied prices for monthly contracts not traded electronically, Bloomberg cited sources as saying.

The move comes after two months of consultations with clients in an effort to reverse a drop market share and improve relations with customers. The board members are set to vote on the outcome of the discussions on August 2, according to the media report.

“The changes mark a shift toward a more conciliatory tone since Matthew Chamberlain took over as chief executive officer in April after years of confrontation with customers over rising fees and efforts to promote electronic trading,” the news agency said quoting unnamed sources.

Some of the proposed changes include a cut to fees on so-called short-dated carries, technology improvements to establish live implied prices for monthly contract currently not being traded electronically, an investigation into switching to a volume-weighted average method for figuring out closing prices and a development of an OTC dealer-to-client trading platform.

The LME is likely to make a formal announcement sometime in early fall.

The discussion around the new strategy is an attempt to fix a “fractious relationship” with clients after “accusations of being heavy-handed,” the media report said.

“The planned changes represent a conservative response to a controversy over moving from the LME’s benchmark three-month forward contracts, a relic of the 1800s when ships needed that time to haul copper from Chile to the U.K., to a more standardized contract,” it added.

Earlier this year, LME said rising fees are impacting trading behavior and “it could be appropriate to consider a modification to the fee schedule, whereby fees on certain carries are reduced.”

The news comes after LME introduced gold and silver futures contracts earlier in July. The venture, the first of its kind for the LME since the mid-1980s, marks a significant development in London's $5 trillion-a-year gold trade, as it offers traders more options and creates additional competition. The LME said that almost 80 tonnes of gold and 397.5 tonnes of silver were traded in their first week. 

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