The London Metal Exchange stops electronic metals trading
Electronic trading has been suspended across all contracts on the London Metal Exchange, leaving dealers unable to place orders in markets from aluminum to zinc while they awaited additional information regarding the cause of the outage. The failure occurred at a pivotal time in the metals calendar, as the market nears the third Wednesday of the month — the primary point of liquidity in the LME’s contracts — coinciding with the turmoil in commodity prices due to the war in Iran. The LME is set to resume trading at 5:30 pm, as reported by sources. The metals markets have experienced multiple outages in recent months, highlighted by the LME’s one-hour delay to the start of trading on January 30. Meanwhile, the CME Group encountered a ten-hour outage that disrupted global markets in November. Traders in CME Group’s natural gas market experienced a two-minute outage amid a period of intense volatility in January.
A spokesperson for the LME stated that they were aware of an issue and were actively working to resolve it as quickly as possible. However, they noted that it would not be resolved in time to prevent a “pricing disruption event” for LME closing prices, which are determined between 4 p.m. and 5 pm. Trading data indicated that the halt was implemented at 2:44 pm. An update on the LME’s website confirmed that an issue had been reported with its electronic trading platform, although other systems continued to function normally. The spokesperson stated that the electronic market was experiencing a “technical halt,” yet inter-office trading, where brokers engage in transactions with one another via phone and electronic messaging, remained operational.
A spokesperson stated that the LME plans to reinstate electronic trading on a secondary server following the closing prices window. Meanwhile, the spokesperson stated that closing prices would be determined using the exchange’s “backup pricing waterfall approach.” This process entails utilizing the latest traded price on the electronic platform along with the accessible information on bids and offers, as outlined in the LME’s published methodology. Data indicate that bids and offers have persisted in the inter-office market for several of the LME’s most sought-after contracts since electronic trading was halted at 2:44 p.m.
Prices Prior to the outage, the market showed mixed results, with copper increasing by 0.6 percent while aluminum experienced a decline of 1.3 percent. The LME introduced a new trading platform in March of the previous year, as part of a comprehensive technological upgrade aimed at enhancing functionality for electronic traders. In contrast to competing exchanges, significant trading volumes on the LME continue to occur through phone calls and electronic messages. However, the LME has been striving to increase on-screen trading following the nickel crisis of 2022.
