LONDON (Reuters) - Matt Chamberlain, the chief executive of the London Metal Exchange (0388.HK), gave a briefing at the Reuters Global Commodities Summit earlier this week.
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Below are some highlights.
The LME is cutting fees for carry trades for a 12-month period to see if volumes that went over-the-counter return to the exchange.
“There will be a volume impact, in my personal view it will come from the month-to-month roll rather than the front-end. Month to month rolls don’t get cheaper until November,” Chamberlain told Reuters.
“There will be a lagged effect as people adapt trading strategies ... I would expect to see any improvement in the first quarter of next year.”
Chamberlain declined to say how much the fee cuts would cost the exchange in lost revenue.
“We’re comfortable with the financial effects and we believe they will be offset by the volume coming back.
We’ve never guided internally or externally that we are going to get all the revenue back ... That would be an absolute best case scenario.
We’re aiming to be back at our historic level of revenue within two to three years with the combination of some volume coming back due to the fee discounts, the OTC booking fee and new initiatives (new contracts).”
The exchange said it would look at an OTC platform for members in September.
Reuters asked if the exchange had abandoned the idea of building an OTC platform
“It’s currently not on our priority list,” Chamberlain said.
“There are so many people who want to partner with us, who have already done a lot of work on the technology and marketing. We would need a very convincing reason to build our own.
The key driver to the partnership is not us taking a stake or being a fintech investor, it’s about adding activity in the dealer client space and driving metals volumes.
I can confirm that we haven’t partnered with anyone in any way, yet”
PLANS FOR LMEselect
Reuters asked if the LME would extend trading hours on its electronic trading system, LMEselect, to facilitate arbitrage trading against COMEX metals.
Chamberlain said that plans to update the technology could make that possible.
“It could be an easy way of getting volume.
COMEX are almost round the clock because their technology supports that - ours doesn’t. There is no reason to not be a 23 hour market.”
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Reporting by Pratima Desai and Zandi Shabalala; Editing by David Evans