Electronic trading has been halted in all contracts on the London Metal Exchange, with dealers unable to place orders in markets ranging from aluminum to zinc as they awaited further information on the cause of the outage.
The failure came at a critical moment in the metals calendar, as the market approaches the third Wednesday of the month — the main focus of liquidity in the LME’s contracts — just as commodity prices are being rocked by the war in Iran. The LME is planning to restart trading at 5.30 p.m. London time, according to people familiar with the matter.
The metals markets have been hit by several outages over recent months, with the LME facing a one-hour delay to the start of trading on Jan. 30, while rival exchange operator CME Group faced a ten-hour outage that roiled global markets in November. Traders in CME Group’s natural gas market were also hit by a two-minute outage during an extreme bout of volatility in January.
A spokesperson for the LME said that it was aware of an issue and was working to resolve it as soon as possible, but that it would not be resolved in time to avoid a “pricing disruption event” for LME closing prices, which are set between 4 p.m. and 5 p.m. London time.
Trading data showed the halt came into effect at 2:44 p.m. local time, and an update on the LME’s website showed an issue had been reported with its electronic trading platform, while other systems were operating as normal.
The spokesperson said the electronic market was in a “technical halt,” but that inter-office trading, where brokers trade with one another over the phone and using electronic messaging, continued to be available.
The LME intends to restore electronic trading on a secondary server after the closing prices window, the spokesperson said. In the meantime, closing prices would be calculated using the exchange’s “backup pricing waterfall approach,” the spokesperson said.
That involves using the most recently traded price on the electronic platform and available information on bids and offers, according to the LME’s published methodology. Bloomberg data show that bids and offers have continued to be made in the inter-office market for some of the LME’s most popular contracts since electronic trading ceased at 2:44 p.m.
Prices were mixed before the outage, with copper up 0.6 per cent and aluminum down 1.3 per cent.
The LME launched a new trading platform in March of last year as part of a broad technological overhaul designed partly to boost functionality for electronic traders. Unlike rival exchanges, large volumes of trades on the LME still take place via phone and electronic messages, but the LME has been seeking to bring more trading on screen in the wake of the 2022 nickel crisis.
