CME Group, the world’s largest derivatives alternate, stated it isn’t planning to launch a nickel contract to rival the London Metal Exchange, regardless of its chief describing the LME as having “a lot of issues”.
“I’m not working on listing a nickel contract,” Terry Duffy, chair and chief government of the Chicago-based group, instructed the Financial Times, including “never say never” however that launching an alternate could be tough.
Users have known as for an pressing overhaul of the LME’s nickel market after the 146-year previous British alternate sparked deep controversy final yr by cancelling eight hours’ of trades when costs surged in a brief squeeze. The determination has drawn lawsuits from clients together with hedge funds and market makers, and led to regulatory investigations.
Adding to its issues, final month the alternate discovered luggage of rocks at a warehouse as an alternative of the nickel they have been meant to include. Duffy stated that discovery reveals “there’s something really violently broken there”.
Last month the top of buying and selling group Trafigura added to stress on the London alternate, saying its nickel contract shouldn’t be match for objective.
Some traders have hoped the CME would launch a rival contract because it already trades aluminium, copper and metal.
But Duffy identified that there have been obstacles to overcome such because the storage and supply of the bodily steel.
In order to create a brand new contract, “you need the guys who have warehouses . . . you need to add value to shareholders”, stated Duffy, who has labored at CME for greater than twenty years, having been a member on the previous buying and selling flooring. “I don’t want to get my team in there and say we can wrestle away liquidity. Liquidity becomes very hard to displace and I still believe that with LME.”
LME is owned by Hong Kong Exchanges and Clearing, and Duffy doubted it was open to promoting. “I’m rooting for them to get it right because it only helps the entire system,” he added.
CME has grown to develop into the world’s largest futures and choices alternate and was one of many first venues to trade crypto derivatives.
Duffy, who has been a vocal opponent of failed crypto alternate FTX founder Sam Bankman-Fried, stated that whereas merchants have made money from crypto, there are few tangible use circumstances except for stablecoins which assist “eliminate friction”.
“Industries are not using [crypto] to create efficiencies for their businesses . . . economies aren’t benefiting, I don’t see that one bit,” he added.