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LME
tightens 'Chinese Wall' rules on warehouses, traders
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[March 29, 2014]
By Eric Onstad
LONDON (Reuters) — The London Metal
Exchange (LME) pressed on with reforms to its warehousing network on
Friday, unveiling tighter "Chinese Wall" restrictions a day after a
court ruling forced the LME to halt a plan to cut delivery backlogs.
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 The LME said it would bolster rules on firms that both trade on the
exchange and own metals warehouses to ensure there was no improper
flow of information or conflict of interest.
It aims to carry out a consultation regarding the proposed changes
and to introduce them in January 2015.
The rules apply to parties such as bank Goldman Sachs and commodity
group Glencore, which both trade metals and own metals storage
facilities.
The LME, owned by Hong Kong Exchanges and Clearing, said in a
statement that an external review found current restrictions between
traders and warehouses were generally adequate.
"The review has, however, helpfully recommended certain
modifications to the existing requirements which the LME believes
will further enhance certain aspects of the information barrier
requirements," it said.
This would "protect confidential information held by warehouse
companies, the possession of which by third parties (including
trading companies) could otherwise give rise to conflicts of
interest and, potentially, market abuse".
It proposed strengthening a rule requiring people to notify the
exchange if there were any reasonable grounds to suspect that the
barriers were being violated.
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It also aims to introduce requirements which would ensure employees
returned confidential information when they stopped working for
warehouse firms.
The moves are part of a sweeping reform plan launched last November
by the world's biggest marketplace for industrial metals such as
copper and aluminum to cut queues for metal and protect against
market abuse.
On Thursday, the LME was forced to halt a plan to speed up delivery
of metals, however, after Russian aluminum producer Rusal won a
court decision which deemed the LME's consultations "unfair and
unlawful".
(Reporting by Eric Onstad; editing by Jason Neely)
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