CME Group, the world’s largest derivatives trade, mentioned it isn’t planning to launch a nickel contract to rival the London Metallic Trade, regardless of its chief describing the LME as having “plenty of points”.
“I’m not engaged on itemizing a nickel contract,” Terry Duffy, chair and chief govt of the Chicago-based group, instructed the Monetary Instances, including “by no means say by no means” however that launching an alternate can be tough.
Customers have known as for an urgent overhaul of the LME’s nickel market after the 146-year previous British trade sparked deep controversy final 12 months by cancelling eight hours’ of trades when costs surged in a brief squeeze. The choice has drawn lawsuits from clients together with hedge funds and market makers, and led to regulatory investigations.
Including to its issues, final month the trade discovered bags of rocks at a warehouse as an alternative of the nickel they have been meant to include. Duffy mentioned that discovery reveals “there’s one thing actually violently damaged there”.
Final month the pinnacle of buying and selling group Trafigura added to strain on the London trade, saying its nickel contract is not fit for purpose.
Some buyers have hoped the CME hoped would launch a rival contract because it already trades aluminium, copper and metal.
However Duffy identified that there have been obstacles to beat such because the storage and supply of the bodily metallic.
With a purpose to create a brand new contract, “you want the fellows who’ve warehouses . . . it is advisable add worth to shareholders”, mentioned Duffy, who has labored at CME for greater than 20 years, having been a member on the previous buying and selling ground. “I don’t wish to get my crew in there and say we are able to wrestle away liquidity. Liquidity turns into very arduous to displace and I nonetheless consider 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 proper as a result of it solely helps all the system,” he added.
CME has grown to change into the world’s largest futures and choices trade and was one of many first venues to commerce crypto derivatives.
Duffy, who has been a vocal opponent of failed crypto trade FTX founder Sam Bankman-Fried, mentioned that whereas merchants have made cash from crypto, there are few tangible use instances other than stablecoins which assist “eradicate friction”.
“Industries usually are not utilizing [crypto] to create efficiencies for his or her companies . . . economies aren’t benefiting, I don’t see that one bit,” he added.