There’s a Lot of Interest in Base Metals: LME’s Chamberlain

So from an LME perspective, we're reasonably optimistic. April was a good volume month for us, our best volume month for well over a year. And I think more broadly, talking to delegates outside, there's a lot of interest in base metals. People are still trying to figure out where it's going to go. These macroeconomic geopolitical questions weigh on both sides of pricing. But in many ways, that's a good place to be because it means people want to hedge, they want to express an opinion. And that's obviously all great for the exchange and our community.

Yes. So this is nickel for our other metals. We've had these hours continuously. But on the 27th of March, we reopened Asia now trading for nickel after the nickel events of March last year. We're really pleased about that. It's just nice to wake up in London, turn on my screen and see 500, 600 lots of nickel traded. And I think that's really indicative of how important this time zone, this geography is to our contracts. And we're really pleased about that. Actually, if I look at nickel generally, April, which is our first month with the Asian hours reopened, full month volumes, outright volumes up nearly 10 percent on the prior month, up 60 percent on the prior year. Obviously, that was just after the events of March. But it feels to me like we're building back what was proven. Nickel, just for context, is around 50 to 600. Yeah.

Not back there yet, and not back yet with the entire contract. But it's a process of rebuilding trust.

Well, that's an abstract concept, obviously. Where are you in that conversation? We're very conscious that trust is something that takes a long time to build or to rebuild. But I would like to think that our market believes we're doing the right things here. For example, the immediate steps we took when we reopened nickel trading last year, be that the daily price limits, be that the RTS position disclosure so that the exchange can have a better view of risk, so that we can be more confident that the events we saw last year couldn't happen again, through to the commissioning of Oliver Wyman to do a comprehensive piece of work. And then the action plan we published back in March of this year, which really committed to a very aggressive two-year program of market improvement. And I'm confident we can deliver on that. Trust doesn't arise overnight, but I really hope people feel we are doing the right things to strengthen this exchange. Some of the guardrails we put in place last year have several components. I want to start with RTS transparency. How has that been received for over-the-counter positions? Yes, so there's always going to be a tension here because understandably, banks don't want to reveal their own RTS books. But I think there was a real feeling after March 2022 that as a community we needed to come together to stop this kind of thing happening again. That's why we put in place the RTS reporting requirements. I think people have taken them in the spirit they were intended. We're not gathering that information for commercial purposes, we're not gathering it to try to bring it on exchange, we're gathering it purely so our market surveillance colleagues can have a comprehensive view of risk. So I'm really grateful that people have taken that in the spirit intended, and I think it's working well. High margins and lower trading limits – obviously you'll get complaints on both sides. How long do you see that in place? Is that still part of your future? Do you want to go completely back to pre-March 2022 levels? Well, we've said that we really want to make sure we've embedded the lessons of last year. So I think people do need to expect that margins are going to be higher because we really want to demonstrate to the whole market that from a risk management perspective, that volatility we saw is baked into margin levels. When I speak to our clients, they would love margins to be lower because they say they want to bring more business to the exchange, and they would do that if margins were lower. But they also understand it's a risk assessment. What I feel confident about is that I think we are now in more of a virtuous circle. Last year we weren't, but this year we are. Volumes in nickel are building slowly, but they are building. As volumes build, we can reduce things like our concentration margins. A concentration margin is set to deal with a low liquidity environment. As liquidity builds, concentration margin reduces. People pay less margin, they trade more, and it's a virtuous circle. So slowly but surely, I think we're beginning to reduce those margin levels. We are reducing margin, not by sacrificing risk management, but recognizing that volumes are picking up. There's more liquidity and we can meet lots of moving parts.

Yeah, it's really driven by market participants more than by me. So the more people who get involved in trading, the quicker that happens. We understand that people will be conservative given what happened last year. But it's been really nice at this conference talking to delegates and speaking to people who say, 'Oh, you know, last week we started putting nickel positions on again.' They're going to be small at first, but that does build. And as I say, it becomes a virtuous circle. So I'm hopeful that we can continue to build on that momentum.