The offices where the London Metal Exchange is headquartered are seen in the City of London, Britain, January 18, 2018 REUTERS/Peter Nicholls/File Photo Acquire Licensing Rights
LONDON, Nov 9 (Reuters) – The London Metal Exchange (LME) said on Thursday it will require warehouses in its network to report all inventory that can be delivered against its contracts, in a move that reduces the complexity of previous rules.
The changes are part of sweeping reforms announced by the 146-year old exchange to boost confidence in the LME, its management and systems damaged by the nickel crisis in March 2022.
Historically, warehouses only reported inventories that were on warrant — title documents that confer ownership — to the LME, the world’s largest and oldest forum for trading metals including copper, aluminium, zinc, lead and nickel.
Three years ago, in an attempt to boost transparency, the LME changed the rules obliging warehouses to report stocks that could be warranted in the future, an administrative burden for warehouses which had to check each contract.
This rule will no longer apply.
The new rules will require LME-registered warehouses to report all LME-branded material that is being stored off-warrant “with only one overall tonnage figure per metal required”, the exchange said in a statement.
“Providing greater transparency and increased reporting of metal stocks stored in LME-registered warehouses is important in ensuring ongoing confidence in the operation of the LME’s markets,” said Robin Martin, LME head of market development.
The new off warrant stock reporting rule will be effective from Feb. 29, and the first report showing February data will be available from April on a one-month delayed basis.
The changes are in response to consultations the exchange launched in May, following up on an action plan set out in March in response to recommendations to prevent market distortions and improve risk monitoring.
“Off-warrant stock reporting reduce the attraction of the LME warehouse network,” a warehousing source said. “But they are under pressure to increase transparency, so they picked something midway.”
In March 2022, after nickel prices more than doubled in a matter of hours in disorderly trade to records above $100,000 a metric ton the exchange suspended nickel trading for more than a week.
Hedge fund Elliott Associates and Jane Street Global Trading are suing the exchange for $472 million after the LME cancelled all nickel trades on March 8, 2022 during the turbulence.
Reporting by Polina Devitt and Pratima Desai; editing by Kirsten Donovan and David Evans
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