London Metal Exchange Precious Metals

The London Metal Exchange will shutter its precious metals trading after operating for only five years. The London Metal Exchange is an exchange that offers forward and futures contracts, plus options on metals. 

Recently, the LME came under scrutiny by traders and the media for suspending trades on nickel. This was due to a short squeeze that occurred as a result of NATO-led sanctions placed on Russian exported nickel. 

As a result, nickel skyrocketed to $100,000 a ton. That’s more than doubling in value compared to the prior all-time high for the metal. This led the London Metal Exchange to suspend trading for several days and cancel a little over $3.9 billion in trades.

Investors viewed this action as market manipulation and nickel trading on the London Metal Exchange has not recuperated yet.

London Metal Exchange’s Five Years of Trading Precious Metals

The London Metal Exchange began trading precious metals in 2017. This occurred right after the exchange partnered with Morgan Stanley and Goldman Sachs Group Inc. 

London is recognized as one of the world leaders in precious metals trading, with trillions of dollars in gold, silver, platinum, and palladium trading hands a year. Ultimately, the London Metal Exchange’s goal was to operate similarly to its New York City counterpart: the Commodity Exchange Inc. (COMEX).  

Unfortunately for the London Metal Exchange, precious metals trading has been subpar compared to other exchanges. 

At its trading peak, about 3 million ounces of gold futures exchanged hands which are minuscule compared to LBMA’s ten million ounces traded every 24 hours. 

In the precious metals market, London’s trading platform is under pressure to become more transparent. Recently, the FICC Markets Standards Board suggested the consortium to use central-limit order books and central counterparties, similar to other exchanges. 

The London Metal Exchange Precious metals service is working towards shutting down the exchange by July 11.

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