The London Metal Exchange will change the way it sets its end-of-day prices in a measure designed to boost transparency in the wake of last year’s nickel squeeze.
(Bloomberg) — The London Metal Exchange will change the way it sets its end-of-day prices in a measure designed to boost transparency in the wake of last year’s nickel squeeze.
The bourse will expand its use of a volume-weighed average pricing mechanism to more of its most-liquid contracts following a consultation on the measures, which were announced in May. Respondents were generally supportive of the proposals, the exchange said in a statement.
The method for determining prices is a fraught issue at the LME, which has been gradually adopting modern trading technology alongside its iconic 146-year-old open outcry trading floor known as “the Ring.” The move could end up favoring big banks and arbitrage traders over more traditional brokers.
A small number of respondents suggested that expanding the use of the volume-weighted average methodology could lead to less orderly pricing, particularly in times of stress, the LME said.
The measures will be phased in between January and March.
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