The London Metal Exchange (LME), the leading platform for global metal trading, has encountered significant delays in the modernization of its electronic trading system. This delay could extend the project, originally set for completion this year, by up to an additional year, according to four informed sources.
In a market already skeptical of the LME management after nickel trading suspension in the previous year, this setback further dampens confidence. “The system isn’t going to be operational by April, there are too many flaws,” disclosed one of the insiders. Financial implications are substantial, with costs reportedly having doubled from the initial estimates last year. Despite this, the precise budget for the project remains undisclosed.
In a statement addressing the delay, the LME said it would cooperate as much as possible with traders.
“We recognise that some participants have requested extensions … We will be sympathetic to such requests, even if this were to result in a short delay to target go-live dates.”
The holdup appears to stem from incompatibilities between the front-end trading platform, crafted by U.S. firm Trading Technologies, and the LME’s intricate contract structure. This structure is unique to the LME, allowing trading for any date from the present up to three months in advance, and even as far as ten years ahead for metals like copper and aluminium.
For market participants, the ability to engage in carry trades to hedge or secure prices is essential. The LME acknowledged the necessity of aligning their platform with other exchanges to support its complex date and carry system.
Despite the challenges and lack of a new projected timeline, the LME maintains its commitment to enhancing the system. Trading Technologies, when approached for comment, redirected inquiries to the LME.
The LME’s modernization project is closely watched by the metal trading community, particularly those dealing in aluminium, alumina, and bauxite, with the outcome poised to significantly influence trading efficiencies and practices.
The London Metal Exchange has yet to announce a revised date for the completion of its electronic trading system upgrade.
