As a recognised investment exchange, the LME has a statutory requirement to ensure that business on its markets is conducted in an orderly manner, providing proper protection to investors.
This includes:
- Having appropriate measures in place to monitor for potential market abuse or financial crime.
- Arrangements for monitoring and enforcing compliance with the LME Rulebook (PDF) (the Rulebook).
- Controls enabling the LME to identify and monitor the positions of market participants.
To assist the Exchange in having appropriate oversight of business that is conducted on its markets, the LME Market Surveillance department is comprised of three distinct but connected functions, as summarised below.
Trade Surveillance
The Trade Surveillance team monitors all order and trade activity on LME trading venues to identify behaviour which may indicate possible breaches of the Market Abuse Regulation (UK MAR), the Rulebook (PDF) and applicable notices. Trade Surveillance may engage with members to obtain further information and understanding of trading rationale as part of its day-to-day monitoring of activity.
Position Surveillance
In accordance with the rules on commodity position reporting, members are required to report to the LME:
- their exchange traded positions
- their OTC positions
- the exchange traded positions of their clients
- the OTC positions of their clients
This enables the Position Surveillance team to monitor for the existence or emergence of large positions and to manage the application of the lending rules. The aim is to ensure that where such positions are held by market participants, the ongoing management of the position does not have an undue influence upon the market.
The team may engage with members to obtain further information and understanding of the purpose of certain positions.
Member Oversight
The Member Oversight team aims to ensure that members have appropriate systems and controls to ensure ongoing compliance with the Rulebook (PDF) and applicable notices. The team is responsible for the Member Audit Programme and for conducting formal investigations into suspected breaches of the Rulebook (PDF) and applicable notices.
The Member Audit Programme conducts thematic reviews to ensure that members have appropriate systems and controls in place to ensure ongoing compliance with the Rulebook (PDF) and applicable notices. Reviews can be either desk based, or onsite visits conducted across a selection of members in all LME categories.
Formal investigation of activity which may be indicative of a breach of the LME Rulebook (PDF) and/or applicable notices is conducted by the Investigations team. Investigations are a fact-finding process, conducted with the assistance of LME Legal, to determine if there is sufficient evidence to suggest that a rule breach has occurred. At the conclusion of an investigation, the team will make a recommendation to the LME’s Head of Enforcement about what action should be taken. This may include, but is not limited to, payment of a financial penalty to the LME and/or a member agreeing to undertake certain remedial action.
Market Surveillance functions
