LME Defends Screen Pricing as Debate Over Ring Closure Heats Up
(Bloomberg) -- The London Metal Exchange defended its pricing process following increased criticism since closing its trading floor, saying objections have risen because more participants are involved electronically.
The bourse suspended trading on its open-outcry floor last March because of the pandemic and switched to an electronic pricing model. It’s now seeking views on a plan to shutter “the Ring” permanently, but has faced resistance from ring-dealers who say that more objections raised by LME members recently shows the pricing process isn’t running as smoothly.
Responding to the criticism, the exchange said the increase coincided with a sharp jump in the number of firms contributing to the pricing process. On average, the number of direct participants in the electronic pricing process for three-month futures was roughly 10 times the number of ring dealers that contributed to pricing prior to the floor closure, it said.
“These trends are consistent with the ‘democratisation’ of the pricing process enabled by the broader participation in pricing,” the LME said in a statement. “The quantity of objections would also be expected to vary with market conditions.”
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