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Warehouse consultation

In November 2013, following a three-month consultation, the LME undertook to implement a warehouse reform package with twelve key elements.

At the core of these was the Linked Load-In / Load-Out (LILO) Rule , mathematically designed to reduce warehouse queues over time.  The introduction of the LILO rule is now scheduled to take place on 1 February 2015.

Of the eleven other elements, six have already been implemented:

  1. Separate steel load-out rate
  2. Per-warehouse queue length report 
  3. Commitments of traders report 
  4. Creation of the Physical Market Committee
  5. Specific powers for the LME to address behaviour that creates or maintains queues (clause 9.3.4 of the Warehouse Agreement )
  6. Information barrier policy review.

On 7 November 2014 the LME launched two consultations on three further key elements. 

The first consultation covers:

  1. Premium futures contracts 
  2. An independent logistical review conducted by Oliver Wyman, an independent consultancy firm

The second consultation covers a legal review of the Warehousing Agreement. 

Launched on 7 November 2014, these comprise two market-wide three-month consultations which will close on 9 February 2015.  As part of this Consultation, the LME is also taking the opportunity to propose a further change not covered in the 2013 Consultation – to create a separate load-out rate for its existing aluminium alloy and NASAAC contracts.

All these changes 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 consultation@lme.com