London, 23 June 2014
The London Metal Exchange (LME) today announces its decision to maintain and further invest in the Ring, the Exchange’s open-outcry trading floor, following a six-month internal review and extensive discussions with market participants.
The Ring is a robust price formation venue that provides a transparent price-discovery process and supports a unique daily prompt structure. It has serviced the global metals industry for 137 years, and is Europe’s only remaining open-outcry trading venue.
“The LME will continue to host the Ring, with its robust and transparent price-discovery process, for as long as the market needs it,” said Garry Jones, CEO of the LME and Co-Head of Global Markets at Hong Kong Exchanges and Clearing (HKEx).
“Our review has highlighted areas where we can enhance the Ring and increase its efficiency alongside the LME’s other trading venues. We will be particularly focused on further aligning it with our electronic trading venue, LMEselect, and on ensuring that it continues to meet global standards for transparency, integrity and governance.”
In 2014, the LME is investing £1 million into Ring-based technology. New wall boards will be fitted on the trading floor with enhanced technology to help integrate Ring and LMEselect pricing and to facilitate business conducted in the Ring.
Decision follows six-month review and extensive discussions with the market
Investing £1 million in Ring-based technology in 2014
Further integration of electronic and Ring pricing
Focused on keeping the Ring relevant and able to suit market’s needs
“While we value the Ring’s long and distinguished history, we are conscious that we need to continue to keep it relevant for the global market and able to serve its needs. We will work with users to further enhance Ring-based trading to keep pace with the rapidly changing marketplace and generate more volume,” said Jones.
Since 2010 the LME has introduced more than 20 new rules to ensure that its price discovery process remains as efficient as possible while servicing members and their clients in an evolving trading landscape. In 2013, the LME doubled the seating capacity for Ring-dealing members to cater for floor teams, which have expanded to meet the needs of clients who increasingly wish to be serviced from the Ring.
In 2014, the LME concluded, through an internal audit, that the Ring meets the IOSCO Principles for Financial Benchmarks. The LME remains committed to ensuring adherence to global standards for transparency, integrity and governance, and will continue to conduct internal and external audits on all its trading operations on an ongoing basis.
The review of the Ring took place as the LME looks to leverage business opportunities following its acquisition by HKEx in December 2012. More than 25 stakeholders participated in the review, including all 11 Ring-dealing members and several industry trade bodies.
The LME Official Prices, LME Unofficial Prices and LME Closing Prices are all, or in part, discovered on the trading floor – the Ring.
Each LME metal is traded in highly liquid five-minute Ring sessions, which are themselves representative of global supply and demand. Trading on the Ring begins at 11.40am and ends at 5.00pm.
Open-outcry trading is particularly important for the LME because of its unique prompt-date structure. There are up to 200 tradable dates per LME metal and open outcry is the most efficient way of trading multiple dates.
Ring trading runs alongside the LME's electronic platform, LMEselect, and the inter-office telephone market.
Only Ring-dealing members can trade in the Ring. There are currently 11 Ring-dealing members at the LME.