LME to launch monthly 'implied pricing' to attract funds

FILE PHOTO: The offices where the London Metal Exchange is headquartered are seen in the City of London, Britain, January 18, 2018 REUTERS/Peter Nicholls

LONDON (Reuters) - The London Metal Exchange (LME) will launch a new set of synthetic monthly prices to make it easier for investors and funds to invest in base metals as the LME battles competition from other exchanges such as those operated by CME Group Inc. CME.O.

The world’s oldest and largest market for industrial metals, the LME said in a statement on Tuesday that “implied” prices for the six main base metals would be provided starting July 30.

The 141-year-old LME has a complex system of futures that allows daily contracts for the first three months into the future, originally set up for physical clients such as miners and industrial consumers.

The new system is expected to appeal to financial investors such as speculators and funds who prefer the standard futures structure with one prompt date each month used by the CME.

“Implied pricing simply delivers a new way to access existing monthly liquidity,” Chief Executive Matthew Chamberlain said.

“We expect this additional option will appeal to those smaller fundamental financial investors not currently accessing our market who will now have the opportunity to see and trade quoted prices on the screen.”

The new pricing for copper, aluminum, zinc, lead, nickel and tin was one of four proposals from a consultation with members last year that sought to boost liquidity.

Implied pricing extrapolates synthetic prices for contracts that mature on the third Wednesday of each month from trading activity on other dates.

The LME is owned by Hong Kong Exchanges and Clearing Ltd. 0388.HK

Reporting by Eric Onstad; editing by Jason Neely