In November 2013, following a three-month market-wide consultation, the LME launched a warehouse reform package with twelve key elements.
Nine of these elements have already been implemented:
1. Linked Load-In / Load-Out Rule (LILO)
Following a consultation with LME-listed warehouses and other interested parties, the decay factor under the LILO rule will be increased from 0.5x to1.0x with effect from 1 August 2015 to coincide with the start of the Third Calculation Period under LILO. This adjustment in the decay factor will, broadly, increase the rate at which queues will fall at affected warehouses, provided such warehouses continue to load in metal.
2. Separate steel load-out rate
3. Per-warehouse queue length report
4. Commitments of traders report
5. Creation of the Physical Market Committee
6. Specific powers for the LME to address behaviour that creates or maintains queues (clause 9.3.4 – now clause 9.3.5 – of the Warehouse Agreement )
7. Information barrier policy review
8. Amendments to LME policies and procedures resulting from an independent logistical review
9. Changes to the Warehousing Agreement following independent legal review
The following two items are subject to a discussion paper which closed on 2 May 2015:
10. LME powers to cap or stop rent in queues
11. LME powers to cap rents and FoT rates
The LME is grateful for all feedback received on the Discussion Paper. Given the sensitivity of the discussion topics, and the large volume of responses, the LME believes it is necessary to take some further time to consider the responses and issues before communicating any next steps to the market. The LME intends to publish a notice as soon as practicable, which is likely to be within the next few weeks.
12. The twelfth and final item in the reform package, premium contracts, are due to be launched in Q4 2015.
All the changes outlined above are designed to address the need to ensure that the LME’s warehouse network fully serves the requirements of the global metals market.
Documents relating to the LME’s warehouse reforms can be found below. Should you have any questions related to the consultation, please contact us at email@example.com