LONDON, Feb 20 (Reuters) - The London Metal Exchange (LME) confirmed on Friday that it is imposing permanent restrictions on members with large positions in nearby contracts, a move initially
LME makes permanent curbs on large positions following member consultation
LME’s Permanent Position Restrictions
LONDON, Feb 20 (Reuters) - The London Metal Exchange (LME) confirmed on Friday that it is imposing permanent restrictions on members with large positions in nearby contracts, a move initially introduced on a temporary basis last June.
Member Consultation Feedback
The exchange, the world's oldest and largest market for industrial metals, said in October it wanted to make the restrictions permanent and subsequently held a consultation of members, which it said garnered support for the measure.
"Overall, market participants conveyed that a rules-based solution applied in a fair and consistent way would bring stability, transparency, and confidence to the market," the LME said.
When Longs Exceed Available Stocks
Zero-Premium Lending Requirement
The restrictions require holders of long positions that are greater than the total stock levels to lend back to the market at a zero premium.
Background: Copper Squeeze in June
In June, premiums for nearby copper contracts jumped due to falling inventories combined with large positions held in nearby dates, prompting the LME's Special Committee to direct market participants to reduce large on-exchange positions.
Preventing Market Corners
The LME said at the time that the actions were taken to head off the development of a potential "corner" on the market or an "undesirable situation".
Premiums Ease as Inventories Climb
Premiums for nearby copper contracts have since declined and moved into discounts, while inventories have climbed.
LME Ownership (HKEX)
The LME is owned by Hong Kong Exchanges and Clearing Ltd.
Reporting and Editing Credits
(Reporting by Eric Onstad; Editing by Joe Bavier)
