LONDON: The London Metal Exchange (LME) on Friday proposed measures that it said would improve transparency and stability in the over-the-counter (OTC) metals market, including more frequent disclosures of all positions.
In March, the exchange was forced to halt trading of nickel after short-covering by one of the world’s top producers, China’s Tsingshan Holding Group, caused prices to skyrocket.
The LME, owned by Hong Kong Exchanges and Clearing Ltd, has said Tsingshan’s trades originated primarily in the OTC market.
“Recent events in the LME Nickel market have demonstrated the effects that OTC activity can have on the wider LME market,” the exchange said in a notice announcing a consultation with market participants on its proposals.
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“The LME believes it is now essential to accelerate the introduction of regular OTC reporting.”
The OTC market is made up of banks and traders who do deals with one another outside of any exchange.
The LME proposed that its members report weekly to the exchange on all the OTC positions they hold in physically deliverable metals with no minimum position size threshold.
It also proposed that holders of large OTC positions should tell the exchange why they held them.
Previous attempts to introduce transparency to the OTC market were resisted by market participants, the LME said. It said a consultation on its proposals would run until May 27.
In the longer term, the LME said it was considering imposing real time reporting of OTC trades alongside reporting of OTC positions.
British financial regulators are probing the suspension of the LME’s nickel market.
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