The London Metal Exchange (LME) will not cut its main trading and clearing fees next year, it said on Thursday, despite criticism that high charges were driving business away from the exchange. There have been pleas to reduce trading fees, including during a recent keynote speech at industry gathering LME Week last month by the founding partner of Red Kite Group, Michael Farmer.
The exchange, the world's oldest and largest market for industrial metals, however, made some concessions on Thursday in other areas. Its clearing house, LME Clear, will cut fees by two-thirds for its compression services and will halve charges for those using warrants as collateral instead of cash or bonds, a statement said.
The LME, owned by Hong Kong Exchanges and Clearing Ltd, will also waive a usage licence fee for physical market participants, it added. The usage licence, which came into effect in April, was targeted at those who use LME prices in contracts or structured products, but do not contribute to the formation of prices. "We believe that this waiver appropriately recognises the strong bond between the Exchange and the industry which it serves," said Chief Operating Officer Matthew Chamberlain.
It was unclear whether the concessions would be enough to calm angry members who have protested against trading fee hikes that came into effect in January and averaged 31 percent. In August, the LME announced 44 percent cuts for short-dated trades, but many members said that did not go far enough to attract back business after volumes declined.
"If costs of trading on the exchange are prohibitive, it will drive customers away and the golden goose will die of malnutrition," Farmer said in his November speech. "Many users will still find the cost of trading to be high and I would strongly recommend the LME to consider further reductions to attract liquidity back."
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