LME to Develop Electronic Options Market on “Premium Quoted Format”

LMEThe London Metal Exchange (LME) plans to develop its electronic options market while maintaining the flexibility of its current inter-office options trading structure. The LME proposes to move from a “volatility quoted format” to a “premium quoted format” – which will bring alignment with the industry standard and offer an increased level of transparency.

Robin Martin, LME Head of Market Development, said: “This planned development ties into our overall trading infrastructure transformation project, which includes the launch of a brand new electronic trading platform with built-in functionalities designed specifically to support options trading. This is a great example of how we can harness technology to modernize and enhance our market for the benefit of our end-users.”

Robin Martin, LME Head of Market Development
Robin Martin, LME Head of Market Development

The operator has issued a market-wide discussion paper regarding the proposed development of its electronic options market as it is seeking views on plans to simplify and standardize some areas of its options market structure in order to support the enhancement of its electronic options market.

The options expiry process; strike listing rules; tick sizes; and the closing price process, are the main topics on which the LME requests feedback, but also broader topics such as liquidity provider programmes and block rules, as well as on the potential introduction of new options contracts.

The London Metal Exchange (LME) is the futures exchange with the world’s largest market in options and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, weekly contracts to six months, and monthly contracts up to 123 months, it also allows for cash trading. It offers hedging, worldwide reference pricing, and the option of physical delivery to settle contracts. Since 2012 it has been owned by Hong Kong Exchanges and Clearing after LME’s shareholders voted in July 2012 to approve the sale of the exchange for a price of £1.4 billion.