The London Metal Exchange is seeking to introduce a single accountability level and position limit across all prompts for each of the LMEprecious contracts, to be launched July 10 -- subject to regulatory approval -- in a bid to simplify the trading process, the exchange said in a note Tuesday.
As such there will be no distinction between spot and non-spot prompts. "In addition, the accountability level will be set at a lower level (in lots) than the relevant position limit so as to act as an early warning of the existence of a large position held on the market," the notice circulated to members read.
Holding a position in excess of the accountability levels will not impose any automatic obligation on the position holder to reduce or otherwise adjust the position, unless directed to by the LME.
The move is driven by increased regulation, primarily the Markets in Financial Instrument Directive II (MiFID II).
"Position holders will not be required to report directly to the LME any positions held that are in excess of the accountability level. Instead, where the LME wishes further information with regard to any position held that is in excess of the accountability level, it will contact the position holder directly," it added.
The exchange said that in advance of the implementation of MiFID II, "and in order to promote a fair and orderly market and prevent abuse, the LME has determined that it is appropriate to introduce accountability levels and position limits for the LMEprecious contracts."
The adjustments are intended to provide members with additional flexibility in terms of implementing their own control procedures, by simplifying the approach taken by the LME.
"Further, where members have already developed their MiFID II-compliant procedures governing position limit arrangements, it is considered that these may be used for LMEprecious contracts as appropriate," the notice read.
Members have until close of play June 9 to respond further, and the rules will not be fully implemented until further consultation is completed.
Following consultation, and after due consideration, "The LME may either implement: (a) The Proposal, a modified version of the Proposal or an alternative to the Proposal; (b) Any other measure(s); or (c) No measures at all."
