LONDON Nov 16 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