Will the 20% of outright three-month business that has recently been done on the London Metal Exchange during the Asian day soon look relatively minuscule?
This is one question that LME brokers are asking themselves as they gather in Singapore for the inaugural LME Asia Week, which is focused on a seminar on May 4.
Volumes traded on the LME during the Asian day have risen strongly in recent years, as brokers at Newedge and Marex Spectron told Metal Bulletin in interviews ahead of the event.
Figures produced by the LME bear out that story. They show that, in one recent month, more than 20% of the daily volume of outright three-month business on the exchange was done in the seven hours between 8am and 3pm in China (for those of you still in London, that is between midnight and 7am UK time).
So business has picked up significantly in recent years, and brokers and traders are continuing to make hires in Singapore and Hong Kong.
The LME steps up support for Asian trading
The LME too, as its Asian md Liz Milan told Metal Bulletin, is looking to increase the support it offers the market in Asia during its own trading day.
One top executive in an LME brokerage told us last week that the exchange also wanted to add more decision-making in the region to meet the needs of clients and brokers there.
But the rise in volumes on the LME, which has been particularly marked since mid-2007, might just be the start.
China appears to be committed to a path of liberalisation, which will open the gate to its commodity markets far more widely as well as freeing large numbers of small and medium-sized companies to trade and grow globally, as Newedge’s Tiger Shi, a former employee of the State Reserve Bureau, told Metal Bulletin.
LME's warehousing back-up has to follow
The incremental steps China is taking to loosen controls over its currency and to open its markets suggest that far larger volumes of business will soon be done in and with the Chinese market.
But there are challenges that the exchange, whether in its current guise or under new owners, has to grapple with.
A case in point is illustrated by the current backwardation on LME copper.
The market in China is in a firm contango but the absence of LME warehouses in the country means that those holding LME-deliverable material in the country cannot readily deliver it into the backwardation.
As China goes global, and western companies look to increase their presence there, such issues should be of the highest priority to the LME and