Cogencis, Friday, Aug 11
[C] INTERVIEW: LME eyes launch of platinum, palladium futures in 2018
--LME market division head: May launch options in precious metals in 2018
By Shrikant Kuwalekar and Darshan Rane
PANJIM - London Metal Exchange, which has witnessed a drop in trading volumes in base metals contracts over the last few years, is betting big on the precious metals complex.
The bourse forayed into precious metals last month with the launch of 100-oz gold and 5,000-oz silver futures contracts, and is now considering launch of palladium and platinum futures in 2018, said Alex Shaw, head of market development at LME.
"We are looking at expanding our precious metals complex," Shaw told Cogencis on the sidelines of the India International Gold Convention-2017 here today. "(We are) looking at launching platinum and palladium contracts next year."
The contracts could be launched by mid-2018, Shaw said.
LME has been working closely with London Platinum and Palladium Market, an arm of the London Bullion Market Association, to develop the proposed precious metals contracts, he said.
The bourse's focus on precious metals is understandable. LME, which is the predominant global exchange for base metals trade, posted a 5.1% on-year drop in average daily volume in May.
And, May was not an aberration. The bourse's averages daily trade volumes have been on a decline for over two years now, due to a downturn in the commodity investment cycle and as traders shifted to base metals contracts on rival CME, which offers lower trading fee and better contract structure.
Hoping to stem the fall in trade volumes, LME turned to precious metals with the launch of gold and silver futures on Jul 10.
LME has been able to garner "good" participation in both the contracts within the first four weeks of launch, Shaw said.
"Our weekly average daily volume for gold and silver is about 8,000 lots," he said.
LME's average daily volume for gold and silver contracts, however, was just 1.8% of the average trade volume on CME Group's COMEX.
Average daily trading volume for gold and silver on COMEX, the world's largest precious metals exchange, was 440,000 contracts in July.
The cumulative open interest in LME's newly-launched contracts was 20,000 lots in the first four weeks, Shaw said, reiterating that it was "very good" for the short span.
Shaw was hopeful that precious metals trade on LME would attract more participants, as London is the world's largest trading centre for gold.
The volume of physical gold traded in London is nearly four times that of COMEX gold futures, according to trade estimates.
Shaw said LME was also looking at launching options trade in precious metals to expand its footprint. "We'll see what we could do with options next year for gold, silver, and potentially for platinum and palladium."
LME is also focusing on India as part of its market development programme, as the country is a dominant player in the global bullion market, Shaw said.
"We will be visiting India quite often this year," he said. "Indian entities have stated their intention to trade in LMEprecious," he added, refusing to divulge more.End

Edited by Akshit Harsh

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