The LME is an odd market

The Chelmsford site includes a reconstruction of the ring, the central open-outcry trading floor where metal prices are set by dealers throughout the day.

Umm, no, not really. Here’s the list of trading times.

Each metal is traded in 5 minute bursts in said ring two or three times a day. it’s an interrupted market, not a continuous one.

A thought occurs too. There are proposals that the equity markets should move to something like this. The US ones anyway. something to do with the terror of HFT. What I’ve not seen though is anyone proposing this who then looks to the LME and says “See! It solves our problem!”. Which I’m not sure it does because the LME also whines a lot about HFT.

This is wrong too:

It is a moot point when international metals trading began in the UK. The LME points to the AD43 Roman invasion of Britain and the subsequent exploitation of copper and tin ore.

We’ve recorded instances of 1000 BC Cornish tin ingots being found in sunken Phoenician boats…..not that Cornwall was really part of Britain then as it still isn’t. Odd folk those over the Tamar…..

10 thoughts on “The LME is an odd market”

  1. I’ve been trying to write a song about what life would be like if Cornwall were an island.

    It’s called “Imagine there’s no Devon”.

  2. Would the global economy really melt down if, say, a bid or offer was binding for some trivial length of time? 60 seconds say? Or if you were likewise required to hold any position for a minimum of 60 seconds? It would at least reduce the perception if market rigging and I’ve no doubt the HD wonks could still find a way to make that work to their advantage. And that capitalism would not collapse.

  3. Sure, it would be fine. More expensive for everyone but it would still work.

    The thing that HFT has really done is reduce the bid offer spread by two orders of magnitude over the past 15 – 20 years. That makes buying and selling for everyone vastly cheaper. The people who have lost out are the market makers. And boy, are they pissed about it. Goldman Sachs bought a US equity market maker for $8 billion. Then closed it a decade later a there was no money in the business any more.

  4. @ CJ Nerd: And for your second album, a song about the island of Rum: “Above us only Skye”…

  5. @tim, so how do we separate the useful bit from the allegations of market manipulation? Such as the placing of bids to push the price up when you actually want to sell? Then cancelling those orders before they are filled. I’m no expert but it looks simple enough and plausible. How do we stamp on that?

  6. “market manipulation – Such as the placing of bids to push the price up when you actually want to sell”

    How exactly would that work, BiG?
    Price only exists at the point of transaction. If you place a bid & shake a seller out, then you have a price. But you also have the stock. Not quite what you wanted to achieve?

  7. HFT algorithms looking to sell do submit small buy orders just below the offer, in the hope that genuine buyers will react by increasing their bids, which can then be hit. However, writers of HFT algorithms are wise to that.

    Generally the computers cost less than the traders they’ve replaced, so the share investor pays less to trade.

    Regulators should ensure that exchanges provide fair market access to all. Beyond that, I can’t see why they shouldn’t let the HFT guys get on with it.

  8. @bis, I’m really not an expert in this but prices are influenced by demand as well as supply. By creating the impression of more demand than there really is (or more supply than there really is), you can move prices without there being any transaction.

    Imagine going to the fish market with a loudhailer announcing you’ve got 400 tonnes of fish to sell. What happens to the prices offered by all the other traders? Right. So if you’ve got a gopher quietly buying up all their stock at knock-down price while you make noisy and visible preparations to “unload” your fleet of lorries, and once you’ve bought what you want you announce you don’t actually have 400 tonnes of fish to sell, or have suddenly decided to not sell it, you have made a killing.

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