The London Metal Exchange (LME) is ditching its attempt to
enter the precious metals market.
The LMEprecious service will be withdrawn around July
11th, with the exchange saying the decision was taken “following discussions with market
participants, and in light of the low levels of trading activity within the LMEprecious
market”.
The attempt to create a London version of the Comex in New
York lasted barely five years.
There shouldn’t be much, if any, market impact, either on
pricing or liquidity. The gold and silver futures contracts haven’t traded since 2020. Even
at its peak, the 3m ounces of gold traded daily was well below the OTC spot market’s roughly
10m oz/day.
Volumes had been stripped bare since Societe Generale, which
was one of the LME’s original partners for the venture, closed the bulk of its commodity
trading business in 2019.
LMEprecious was launched in 2017 with a number of partners,
including the World Gold Council, in an effort to introduce exchange-traded London precious
metals products, which it was hoped would improve pricing transparency. However, LME was
never able to take enough of the OTC market share.
Still, there is growing
pressure to take London’s precious metal trading in a more transparent direction. Last
November, the
FICC
Markets Standards Board
recommended more use of central-limit order
books and central counterparties, which are common to exchanges but not OTC markets.