London Metals Exchange boosts liquidity with introduction of artificial monthly pricing

The London Metal Exchange (LME) is set to boost its liquity with the introduction of fresh set of artificial monthly prices, designed to make seamless the process of investing in six base metals namely copper, aluminum, zinc, lead, nickel and tin.

This is as the LME struggles with competition from other exchanges such as those operated by CME Group Inc.

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

The exchange 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,” Matthew Chamberlain, the chief executive 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.