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The 140-year-old London Metal Exchange will plan for an overhaul of its trading structure to attract more financial investors as it faces competition from futures exchanges such as the CME Group.
The exchange’s newly appointed chief executive, Matthew Chamberlain, launched a 56-page discussion paper Monday that aimed to open a path forward for reform.
The document suggested a move towards a monthly cash settled futures contract targeted at financial investors.
The LME, which sets the global price for copper, aluminium and nickel, said it would “plan for a potential industry-led managed transition to a more monthly market structure,” from its current three-month trading structure used by the global mining and metals industry.
The LME provides contracts for metal traded daily up to three months, which is useful for physical users of the metal who may want to hedge a delivery or customer order on a specific date. Financial investors, however, generally prefer trading a standard monthly futures contract that allows for easier buying and selling.
The LME has faced two years of falling volumes. Its former CEO Garry Jones abruptly left the exchange in January.
Mr Chamberlain said the exchange wanted to ask whether it could make its market more attractive to other users, apart from its physical metal users.
“We definitely want to drive volumes back up by bringing more people to the market,” Mr Chamberlain said.
The LME said it would prepare for a transition to a monthly futures contract but would also come up with a contingency plan if it continued to lose trading volumes to other markets.