London — The London Metal Exchange is fine-tuning new systems and rules, scheduled to begin toward the end of 2018, that will enable it to launch a wider range of contracts, including new aluminum futures.
The LME said Wednesday that, following the technical deployment of "dynamic instrumentation" towards the end of 2018 -- and in response to specific requests from market participants -- the exchange proposes to launch eight new cash-settled futures contracts from January 2019, to include: three regional hot-rolled coil contracts (North America, Northern Europe and FOB China), two regional aluminium premium contracts (US and European duty unpaid), and one each for alumina, cobalt and molybdenum.
To facilitate the broader range of contracts, "the LME is proposing rule changes to enable a new streamlined approach to selected contract launches where the LME sees potential future success."
Matthew Chamberlain, LME CEO, said "dynamic instrumentation" will enable low cost launches with little administrative burden.
"This is not to say that we won't continue with our usual targeted approach to selected product launches -- lithium is a good example of where we are working very closely with the industry to ensure we provide the right risk management solutions for this expanding market -- but it means we can now employ a variety of product development approaches to ensure continued growth across our contract offering," the CEO added.
In April the LME said it was looking to trial an electronic settlement that could replace the evening ring settlement for a period of three months in early 2019.
"It will be a three-month trial, where we will move the settlement of the three-month nickel price in the evenings to electronic, we will retain the lunch-time prices...with their current methodology," Chamberlain said in April, adding that only the evening ring session would move electronic.
"The trial comes as a result of views expressed by a number of users...who stated their preference for an electronically derived methodology for determining closing prices," Adrian Farnham, CEO of LME's clearing house LME Clear, said Wednesday.
"While our decision to conduct this exploratory trial in no way prejudges the LME's view on the most effective price discovery model, we believe the trial is an essential step in gathering the data needed to take such a view," he added.
