The London Metal Exchange is to raise the average transaction fee, including trading and clearing, by 34% on January 1 to help cover the rising cost of the regulatory environment and necessary system upgrades, the LME said Monday.
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The "new simplified tariff provides an all-in transaction fee with trading and clearing components, all now charged in US dollars, thereby aligning exchange fees with the currency of the contracts traded," it said.
When Hong Kong Exchanges and Clearing Limited bought the LME in 2012, it said it would not raise prices until 2015.
"Following the purchase by HKEx, significant financial commitment has already been made in the LME and LME Clear businesses," the LME said.
"The changing regulatory environment and necessary system upgrades have called for substantial investment, which is set to continue as the LME expands its user base, launches new products and enhances its services for the global metals markets."
Garry Jones, LME CEO and HKEx co-head of global markets, said: "The new LME tariff is competitive and ensures we can continue focusing on innovation and offering users the highest levels of service."
The increase should be seen as a rebalancing of the exchange and as part of the ongoing evolution of the LME, Jones told reporters.
"This fee increase today and the ongoing evolution of the LME is a balance between a fair return for the investors and fair transaction costs for the participants. It has to be a balance between those two," he said.
Jones said the LME remained the central liquidity pool for metals markets and had introduced a meaningful increase in fees for seven years.
"You are not going to see increases of this kind of scale going forward because this is the rebalancing, going from a not for profit member only semi mutual into a commercial operation," he said.
In terms of the overall value cost of trading metals, the LME fee increases were marginal, Jones said.
For copper, the fee represents 0.0015% of the overall value cost of trading a lot of copper and 0.0054% of the overall value cost of trading a lot of aluminium.
HKEx CEO Charles Li said the "increased revenue stream for the LME will deliver better systems, more flexibility for users and more products tailored to meet the changing needs of market users".
The LME said the tariff "includes a significant discount on trades transacted on the ring, which reaffirms the LME's commitment to the trading floor and recognizes its vital role in the price discovery process".
Jones told reporters ring trading was not continuous trading and, as such, should not be charged in the same way as continuous electronic trading on the exchange.
"The ring is not continuous open outcry...it is a short period of trading that works towards a price reference process," he said, adding the LME recognized the contribution ring traders make to the price reference process.
In June, the LME said it had decided to maintain and further invest in its open-outcry trading floor -- the ring -- following a six-month internal review and discussions with market participants.
"The LME will continue to host the ring, with its robust and transparent price-discovery process, for as long as the market needs it," Jones said.
"Our review has highlighted areas where we can enhance the ring and increase its efficiency alongside the LME's other trading venues. We will be particularly focused on further aligning it with our electronic trading venue, LMEselect, and on ensuring that it continues to meet global standards for transparency, integrity and governance."
The ring, which has serviced the global metals industry for 137 years, is Europe's only remaining open-outcry trading venue.
Ring trading runs alongside the LME's electronic platform, LMEselect, and the inter-office telephone market. Only the LME's 11 Category 1 ring-dealing members can trade in the ring.
Jones said the metals industry had been fully consulted in the review process for the fee increases.
Matt Chamberlain, head of business development at the LME said: "The fee increases were all done with the business models of our stakeholders in mind... [they have] gone up in a sensitive way which does not disadvantage anyone or make anyone's business model untenable".
Jones said the Financial Conduct Authority had been consulted and told about the fee increases.