SHANGHAI, Mar 15 (SMM) - On Mar 14, London Metal Exchange (LME) announced to impose a 15% range limit on daily prices for all metals, in addition to confirming that LME nickel contracts will resume at 08:00 London time on Mar 16 (Wednesday) 2022 at all LME execution venues.
LME Nickel re-opening notice (*personal understanding)
- Nickel will be re-opened at 08:00 AM London time on March 16 and transactions on LMEselect will resume in the usual way, with the pre-open starting half an hour before the market opens, i.e. electronic trading starts at 07:30AM London time and members can start submitting orders to LMEselect to help rebuild the order book before the re-open.
- From March 17, trading hours return to normal (Select London time 01:00-19:00) . For the avoidance of doubt, no nickel contracts will be allowed to trade at any LME execution venue (including the inter-office market) until the trading hours.
Intraday limit up/down
- Set a limit up/down applicable to all base metals: the maximum daily limit up/down for other base metal contracts will be the closing price of the contract on the previous trading day plus or minus 15%, and for nickel at least plus or minus 5% and will be subject to review and adjustment based on market conditions. The limit up/down system will be implemented from March 15 and the stop-limit for nickel will be in place from the resumption of trading.
- The nickel price range will be set from March 16 and the exact % of limit up/down will be announced before 14:00 London time on March 15 and will not fall below 5% (as opposed to the previously proposed 10%).
- Prices traded at other LME trading venues besides the electronic market are also subject to the same restrictions and cannot exceed the maximum increase or decrease of the day, otherwise the transaction is considered invalid.
- If there are bids exceeding the upper limit of the day in electronic trading, or the offers below the lower limit of the day, such trades will be rejected by the system without affecting the market.
- LME will determine the closing prices in the same way as it previously defined the closing price (MOC).
If there are bid worksheet exceeding the upper limit of the day in electronic trading, or the offer worksheet below the lower limit of the day, such worksheet will be rejected by the system without affecting the market. This rule limits the occurrence of short-term extremes.
Delayed delivery
- LME has delayed all the delivery date for nickel to March 23. If there are nickel positions that expire between March 16 and March 22, unless delivery or lading is selected, the current method will be followed, with the daily price delayed by one day at flat (lvl) until the expiry date of March 23. Delayed delivery has given short delivery viability in the short term.
- Increase the number of delivery brands to facilitate the solution of the delivery shortage problem (all other exchanges with delivery shortage problems may need to be considered).
Largeholder Position Report
- The most important aspect of the new regulation is the transparency of trading, which requires members to report all OTC position reports over 100 lots by 20:00 daily, which the exchanges can be aware of and ask questions or limit positions on large investors at any time(increased regulation and controllability).
- The accountability level for large nickel positions will be lowered from the previous 6000 lots to 3000 lots, and if the position exceeds 3000 lots, the exchanges will have the right to ask for the reason for the position, this rule will apply to a) member positions b) exchange clearance and OTC positions.
- The LME Clearing House may require additional pledges from members if it becomes aware of increased margin delivery, delivery, concentration, market reversal and credit risk.
The average price for the month
From March 8 to March 15, although trading was interrupted and no CSP or Closing prices were available, the number of days of interruption will still be included in the total number of trading days for the month, but the official prices of the interruption day will use the official prices of the next trading day. The average monthly price will remain at a high level. The costs of raw materials at LME average prices will still be driven up to a high level (higher than domestic prices) and the downstream may bear a larger loss in the short term.
