REFILE-UPDATE 1-LME sale on track, keeps metal storage under scrutiny
LONDON Nov 16 (Reuters) - The London Metal Exchange (LME) expects proposed changes to its warehousing rules to go some way to solve problems in the network of warehouses it monitors, but would continue reviewing the situation, chief executive Martin Abbott said on Friday.
He also said regulatory approval of the sale of the LME to Hong Kong Exchanges and Clearing was still on track for the end of the year.
The LME, the world's largest metals marketplace, on Thursday proposed a new rule requiring warehouse companies to deliver out an extra 500 tonnes of metal if they already have commitments to move out a large consignment of another metal.
The LME, the world's biggest base metals marketplace, has been reviewing warehouse load-out rates as it tries to deal with backlogs appearing across its global warehouse network.
Abbot told a news conference he expected the new rule, if adopted, would come into effect on April 1 next year. "If 500 tonnes doesn't work we will review it, but we expect it to work," he said.
The LME has struggled to modify its warehousing system to satisfy traders, consumers and the warehousing companies.
The problem has caught the attention of the European Commission, which is gathering information on the issue, industry sources have told Reuters.
Abbott said the commission had not approached the LME with any questions, but added "the door is open".
One way to pacify customers stung by the steep surcharges to get physical supply that have resulted from the backlogs would be to hedge those premiums, and banks are in talks on offering such a derivative.
Abbott said those plans by banks could work, "because that's how over the counter markets work, they're able to launch bespoke products."