We have introduced a series of updates to our electronic trading platform, LMEselect to facilitate trading and increase transparency.
LMEselect 9.0 upgrade
LMEselect 9.0 went live on 27 March 2017 and includes new functionality to comply with MIFID II, such as:
Additional fields on trade order entries such as client ID information and what the user's trading capacity is e.g. dealer/broker etc. For FIX API participants these additional tags will be hard-coded into the FIX messaging, while GUI users can select uploaded templates from the PTRM system. The latter is especially important as this saves considerable time for the user upon entering an order.
The introduction of Dynamic Price Banding (DPB) limits to replace the previous deviation limits in LMEselect, providing a more comprehensive set of values. DPB now includes limits for spread trades, reducing the likelihood of erroneous carry trades from occurring on the LMEselect market.
Additional PTRM limits introduced to cover options.
Market participants can trade with increased confidence in the market, safe in the knowledge that the additional system limits will reduce erroneous activity. Participants will also have the ability to trade new products with this version of LMEselect such as LMEprecious.
Order-to-trade ratio change
We lifted the LMEselect 50-1 order-to-trade ratio restriction for outright 3rd Wednesday monthly contracts. The initiative covers order actions on 3rd Wednesday monthly prompts out to six months for aluminium, copper and zinc.
Unrestricted order entry means that LMEselect participants can submit as many 3rd Wednesday order-actions as they like - so encouraging more liquidity on near-by monthly prompts for the market as a whole.
Pre-trade risk management
We introduced new pre-trade risk management (PTRM) functionality to LMEselect. As well as enabling a more secure market for all, PTRM facilitates safer onboarding of new member clients.
More specifically, PTRM provides members with the ability to set a variety of limits for their own trader users and order-routing clients. All orders sent to the LMEselect system pass through this pre-trade risk system regardless of whether specific limits have been set for the user account or not.
We increased LMEselect tick sizes to match our open outcry platform, the Ring, and better align our markets. All tick sizes were changed (see table below) to increase the depth of liquidity at each tick value by concentrating orders to fewer levels in the order book. We are seeing tighter LMEselect spreads as a result.
LMEselect tick sizes as of January 2015
|Metal||Tick size (US Dollars)||Tick value (US Dollars)|