The LME bourse may consider expanding outside its main metals market, with agriculture and soft commodities highlighted as possible inclusions, along with further expansion in ferrous-related commodities.
Expansion may help better use resources and synergies after the London exchange built its own clearing house and grew electronic trading.
Eventually, further listings in the ferrous markets would be logical to complement the current steel rebar and scrap, along with its billet offering, LME CEO Garry Jones said during a presentation late Monday in London. The oil market was said to be of less interest due to liquidity concentrated at two established bourses.
The possible moves into listing iron ore, hard coking coal and HRC that were previously touted are yet to be defined.
In the ferrous market, the LME is currently focusing on its recently launched cash-settled rebar and scrap futures contracts and the physically settled billet futures contract is under review, said Matthew Chamberlain, head of business development.
"We're pretty clear cash settlement is the way to go with steel futures contracts," he said.
Chamberlain indicated however that there was a concern that, if the billet contract was also listed as cash settled, this could reduce liquidity on the other two contracts.
He added that at the moment, in Turkey alone, 10-15 significant market players are pricing forward looking at the LME contracts, while not necessarily actually trading the listed contracts.
The LME may consider the eventual launch of contracts in hot-rolled and cold-rolled steels and "in the background looking at iron ore. We're putting a lot of effort into scoping the market," he said.
The exchange's latest venture, LMEshield, certifies physical commodities, including those which are not in LME warehouses and commodities like coal not listed on the LME to help in collateralizing and securitizing more commodities outside its core market.
The move may help to provide counterparty assurance and trackable data for the market.
Large commodity users and traders, including those countries without existing LME warehouses may be a source of growth.
India, South Africa, Brazil, Chile, China and Saudi Arabia, where the LME does not have approved warehouses, were areas highlighted for expansion through the venture, which will also support China's One Belt One Road initiative to further develop historic trade routes, initially including Malaysia.
"We are a liquidity pool and are extending our range of market participants," Jones said. "It's very important we enhance our business with China and India."
The CEO added that Indian markets are currently very fragmented but are a "key area" for the LME.
