LME opts for longer day to lure Asian dealers

SHANGHAI: The London Metal Exchange will allow screen trading of its contracts during the Asian day from today to attract more business from countries including China, the biggest user of metals.

The world's biggest metals exchange will start its Select trading system an hour before the Shanghai Futures Exchange opens.

The 129-year-old metal exchange, the last open-out cry market in London, is trying to snare more users in Asia, where demand for metals is growing faster than in other parts of the world.

China's 10 per cent annual average growth in the past three years has made it the biggest user of aluminium, zinc, copper and nickel raising the need for futures that allow traders to cut the risk of sudden price changes.

Longer hours "will bring the two markets closer together, making it easier for our clients to trade and arbitrage", said Zhong Min, futures trading manager at Jinrui Futures, which last year was the biggest brokerage by volume on the Shanghai Exchange.

The extended trading hours will apply in Japan and Singapore, where authorities have allowed the exchange to make Select (which allows trading between metal exchange member companies) available to approved traders.

The metal exchange is yet to get approval from Hong Kong and Australia.

The exchange does not need permission from the Chinese government to make Select available in China so it is open to approved Chinese metal exchange members.

In October, the metal exchange signed an accord with the Multi Commodity Exchange of India, which allows the Mumbai bourse to use metal exchange prices as the basis for settling its futures contracts in aluminium, tin and nickel.

"The volumes coming from Asia are encouraging," said John Browning, director of European e-commerce at Barclays Capital. "The Asian market continues to grow."

However, longer trading hours may not boost trading volumes if there are not enough participants.

"The real key depends on whether dealers provide liquidity or if they turn around and say: you want to find out what our prices are, give us a call," Jeremy Goldwyn, global head of industrial commodities at Sucden UK, said.

"If they feel that they've got a natural advantage staying that way, then Select's extension won't have a dramatic impact."

The exchange's plan to extend trading hours from March 1 derailed after Britain's antitrust regulator imposed a ban following a complaint by London-based Spectron, which operates its own trading system. The measure was dropped later.

- BLOOMBERG