LME Issues Discussion Paper on Development of Electronic Options Market

The London Metal Exchange (LME) announced today it has issued a market-wide discussion paper regarding the proposed development of its electronic options market.

Following extensive engagement with its Traded Options Committee and in response to demand from market participants, the LME plans to develop its electronic options market while maintaining the flexibility of its current inter-office options trading structure, according to the announcement.

“This planned development ties into our overall trading infrastructure transformation project, which includes the launch of a brand new electronic Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term with built-in functionalities designed specifically to support options trading,” said Robin Martin, LME head of market development. “This is a great example of how we can harness technology to modernise and enhance our market for the benefit of our end users.”

Moving towards a "premium quoted format"

In order to broaden participation in its electronic options market, the the LME proposes to move from a “volatility quoted format” to a “premium quoted format”, which will bring alignment with the industry standard and offer an increased level of transparency.

The statement said that the LME is seeking views on plans to simplify and standardise some areas of its options market structure in order to support the enhancement of its electronic options market. The LME has requested feedback on the following areas of development: the options expiry process; strike listing rules; tick sizes; and the closing price process.

The exchange is also keen to hear views from the market on broader topics such as Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term provider programmes and block rules, as well as on the potential introduction of new options contracts, according to the statement

The discussion paper process will close on 29 July 2020 and next steps will be announced shortly thereafter.