The LME has robust business continuity procedures in place designed to deal with a wide variety of potential developments to ensure service resiliency, availability and stability across our platforms, during and around unforeseen events, crisis, or out-of-the-ordinary operating environments.
The LME’s framework has modelled and anticipated a broad range of scenarios, including pandemics.
The LME enacted its BC pandemic plan in early 2020 in response to the outbreak of COVID-19 to address potential risks.
The LME places the utmost importance on managing the health and safety of its staff, its Ring dealing member teams and the wider community, as well as maintaining a stable and orderly market.
The pandemic plan includes necessary protocols as part of a response to a number of contagion/infection related scenarios with preparations undertaken to ensure an efficient, effective and appropriate response should a suspected or confirmed case arise.
The LME’s plans consider the end-to-end provision of business services including its vendors and business partners.
The LME has implemented the following measures in response to the spread of COVID-19 and to mitigate contagion risk and maintain an orderly market:
Home-working for LME employees where possible
Full risk assessment of workplace completed regularly to ensure risks are appropriately mitigated for the safety of those staff in the office
Contingency plans for LME Ring trading, the warrant depository function and other potential physical supply issues
The LME continues to monitor the evolving situation, including UK Government guidance and measures initiated, and will also continue to liaise with industry bodies, regulators and experienced business continuity professionals.
Additionally, the LME has issued weekly updates to members on policy changes as the situation evolves.
The LME’s pandemic plan enables it to continue to serve the metals and financial community with all its business services available.
The LME temporarily moved to fully electronic pricing on Monday 23 March 2020 (with prices being calculated on the basis of electronic market activity on LMEselect). Ring trading is being suspended until conditions normalise in respect of COVID-19, at which point Ring trading will resume. During this period, trading will be conducted via LMEselect and the inter-office market.
This decision took into account relevant advice of the UK Government, and was taken to protect the health and safety of LME staff and the staff of Category 1 members, as well as to prevent the spread of COVID-19.
Since this time the UK Government advice has continued to prioritise social distancing as a key method for avoiding the spread of infection. Notwithstanding the easing of social distancing rules from 4 July 2020 in respect of the “1m+” alternative to the 2 metre rule, the position of the LME remains not to reopen the Ring until such a time as it would be consistent with the Government’s social distancing guidance.
The LME continues to engage with its Category 1 members as guidelines evolve and remains committed to reopening the Ring once it is safe to do so.
Further information regarding the criteria set out by the LME for the return to Ring trading can be found in Notice 20/187.
The LME issued its latest BC pricing procedures for the determination of Official and Closing Prices on 10 March 2021 (effective from 29 March 2021), which include some small enhancements to the Closing price mechanism in order to align it better with the current electronic price discovery context.
The benchmark methodologies for the Official Prices and Closing Prices continue to apply, with the LME relying in particular on its ability to calculate Official Prices and Closing Prices on the basis of LMEselect activity.
The LME has received a number of questions and concerns about the possibility of market tightness or physical supply disruption caused by difficulties in putting metal on warrant or delivering metal in to and out of warehouses.
As a general point, the LME expects its listed warehouses to have robust procedures in place to deal with the effects of COVID-19, and warehouses should make every effort to continue to meet their obligations under the Warehouse Agreement and applicable policies.
Nevertheless, the LME is conscious that the nature of COVID-19 means that it is foreseeable that a Delivery Point, or an individual Warehouse within a Delivery Point, is forced to shut for a period of time. If a Delivery Point as a whole is shut, then it follows that all the Warehouses operating within that Delivery Point would also be unable to operate. Given these risks, the LME has developed procedures to manage the temporary unavailability of a Warehouse or Delivery Point as a result of COVID-19, in line with the provisions of the Warehouse Agreement and addressing potential issues around delivery obligations, warranting, and rent payments. These procedures have been discussed with the LME Warehousing Committee and would only be invoked (via LME Notice) in the event of closures relating to COVID-19.
In addition, the LME has contingency plans in place to enable warehouse listings to take place remotely on a temporary basis. This is to ensure that listings for additional warehouse space can still be considered, as long as supporting evidence can be provided to show that the warehouse meets the LME’s listing criteria.
Further, it is worth noting that the LME’s Special Committee has a broad range of powers to ensure an ongoing orderly market.