LME announces introduction of financial OTC booking fee and enhanced trading regulations

1 March 2018

  • Modifications made to financial OTC booking fee following market feedback
  • Proposed new rules concerning the use of LME data, systems, trading venues and intellectual property to be implemented with immediate effect
  • Financial OTC booking fee policy to be payable from 1 June 2018

The London Metal Exchange (LME) today announced the introduction of its updated Financial OTC Booking Fee Policy and enhanced trading regulations, following a consultation period with the market.

Matthew Chamberlain, LME CEO, commented: “The consultation feedback provided a range of viewpoints regarding the OTC booking fee – some were in favour while others had reservations. We have considered and addressed the concerns voiced – which in some cases led to modifications to the policy – and we will now work with our market to ensure the smooth introduction of the new set of proposals.”

The financial OTC booking fee, which aims to rebalance the disparity between LME and OTC contract fees, is set at $1.00 per equivalent LME lot, and will be paid by financial institutions for each OTC trade executed in place of an LME client contract. This amounts to 4 cents per tonne in respect of aluminium or copper. The new fee model is illustrated below:

In response to feedback from consultation respondents, the LME has made a number of amendments to the Financial OTC Booking Fee Policy, including exclusions from the policy for structured products and financing trades. Users of structured products can now opt instead to pay a simple licence fee for the use of LME prices and data. The LME has also provided further clarification on the policy where respondents felt additional information was required.

Adrian Farnham, LME Clear CEO, said: “We have carefully considered every consultation response we received – with particular attention paid to the regulatory and competition concerns that were raised with regard to the financial OTC booking fee. Not only have we given extensive consideration to these issues, but we are confident that the proposal is transparent, fair and non-discriminatory – which is fully aligned with our underlying commitment to fairness set out in our strategic pathway last year. We were particularly pleased that client feedback to the consultation suggested that the new financial OTC booking fee would not significantly impact their trading activities.”

All other proposals – including new rules around alternative trading platforms’ use of LME intellectual property or systems and the technical rules to protect the integrity of LME trading venues and data – will be implemented as per the original proposals.

The new Rulebook comes into force today. However, and again based on market feedback, the LME has postponed the application of the financial OTC booking fee until 1 June 2018, to allow market participants more time to make any necessary preparations. The LME’s market data licences are also being updated to ensure that the financial OTC booking fee applies to relevant non-member financial intermediaries, and will deliver a level playing field between market participants.

The LME has published an updated “Quick Guide to the Financial OTC Booking Fee”, which provides a helpful reference for all market participants to understand what, if anything, they will need to do in respect of the new fee.

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Contact details

For further information or to speak to an LME spokesperson, please contact:  

Miriam Heywood
Tel: +44 (0)207 113 8538
Email

Bianca Blake
Tel: +44 (0)207 113 8534
Email