LONDON (Reuters) -The London Metal Exchange (LME) plans to set permanent rules that impose restrictions on members with a large positions, it said on Thursday. The exchange, the world's oldest and
LME plans permanent rules restricting large-position holders
Overview of LME's New Regulations
By Eric Onstad
Reasons for the New Rules
LONDON (Reuters) -The London Metal Exchange (LME) said on Thursday it plans to set permanent rules that impose restrictions on members with a large positions in nearby contracts amid low inventory levels.
Impact on Market Participants
The world's oldest and largest market for industrial metals, which is owned by Hong Kong Exchanges and Clearing Ltd., imposed temporary restrictions in June after premiums for nearby copper contracts jumped.
Consultation Period and Next Steps
The LME said these were introduced in response to the low-stock environment combined with large positions held in nearby dates, which had prompted the LME's Special Committee to direct market participants to reduce large on-exchange positions.
Recently, premiums for nearby zinc have soared to record levels after inventories slid by about 85% so far this year.
MAINTAIN ORDERLY MARKETS
"The LME believes that having a permanent rule that applies to the whole market to deal with market participants with significant positions in nearby prompt dates is the most appropriate measure to maintain orderly markets," it said.
The LME said in June that actions had been taken to head off the development of a potential "corner" on the market or an "undesirable situation".
The restriction requires holders of long positions which are greater than the total stocks levels to lend back to the market at a zero premium, the LME said in a statement on Thursday.
The new rule also expands existing restrictions on so-called "tom-next" positions that are closer to delivery, it added.
In zinc, the premium for the cash contract over the three-month forward hit a record of $339 a metric ton last week, but had dropped to $133 on Wednesday.
The LME said a consultation would be open until November 21.
(Reporting by Eric Onstad; Editing by Bernadette Baum and Alexander Smith)
