February 17, 2014 / 12:40 PM / in 4 years

London Metal Exchange to expand data access to spur computer-driven trading

LONDON, Feb 17 (Reuters) - The London Metal Exchange (LME) will expand direct access to data feeds from its electronic trading system, aiming to boost computer-driven trading, the exchange said on Monday.

High-frequency trading on financial markets has spurred controversy and has been blamed for volatile market moves, such as the plunge in shares on Wall Street in 2010, known as the “flash crash”. Supporters of such trading say it adds liquidity to markets.

The European Union agreed last month on new curbs on high-speed trading to be implemented by the end of 2016.

Starting on March 24, clients of LME members will be able to plug into a data feed from the LMEselect electronic trading system instead of having to go through third parties, a statement said.

The LME, the world’s biggest marketplace for industrial metals trading, is owned by Hong Kong Exchanges and Clearing Ltd .

“The new policy is of particular interest to members’ clients pursuing an algorithmic trading strategy, as they can now trade with the benefit of lower-latency data access,” it said.

Algorithmic traders use sophisticated computer programmes to control trading decisions and split-second timing can be key to their strategies. A lower-latency network connection boosts speeds and cuts delays.

“The provision of data directly to LME member clients will allow market participants to deploy a broader range of trading strategies on LMEselect, adding liquidity to the orderbook to the benefit of all market users,” Matthew Chamberlain, head of business development at the LME, said in the statement.

The direct access will only apply to data - placing orders will still require going through third parties for non-LME members.

“The LME continues to investigate potential DMA (direct market access) approaches (for trading), but will only implement a DMA solution if it will bring incremental liquidity to the market, with consequent benefits for existing members and their clients,” the LME said.

In 2013, 171 million lots were traded on the LME, the equivalent of 4 billion tonnes and $14.6 trillion in notional value. (Reporting by Eric Onstad; Editing by Mark Potter)

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