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Trust in LME management's ability to efficiently run the world's
largest and oldest forum for metals shattered last year after a
disorderly market forced the exchange to suspend nickel trading
for the first time since 1988.
The project to revamp the LME's electronic system was due to go
live in June this year. But in July the LME postponed completion
to end-March 2024.
"The system isn't going to be operational by April, there are
too many flaws," one of the sources said, adding that costs last
year had already doubled from the amounts budgeted.
The overall budget for the project has not been disclosed.
"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 LME
said in response to a request for comment.
The exchange, owned by Hong Kong Exchanges and Clearing, did not
give a new timeline.
Sources said the front-end trading platform developed by
U.S.-based Trading Technologies does not work for the
complicated structure of contracts on the LME.
In response to a request for comment, Trading Technologies said:
"We would defer to the LME on this."
The problem comes from the LME's unique date structure which
allows trading for any day between the cash contract and the
benchmark three-month forward. Beyond that, metals including
copper and aluminium, can be traded up to 10 years in the
future.
Carry trades or price differentials between contracts along the
maturity curve are crucial for consumers wanting to hedge their
needs and producers aiming to lock in selling prices.
One important aspect, the LME said, is aligning its platform
with other exchanges. "This of course means that the front-end
interface will change to a more market-standard design – while
still providing support for all of the LME's dates and carries."
(Reporting by Pratima Desai; editing by David Evans)
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