CME launches nickel contracts on new platform that will create competition for London stock exchange
2023.02.23 06:42
CME launches nickel contracts on new platform that will create competition for London stock exchange
By Ray Johnson
Budrigannews.com -According to three knowledgeable sources, CME Group intends to launch a nickel contract that will be settled using prices gathered from a platform to be launched by UK-based Global Commodities Holdings (GCH), which could eventually compete with the London Metal Exchange.
Producers and consumers who used nickel as an ingredient in the industries of stainless steel and electric vehicles relied on LME nickel prices as a global benchmark for many years.
However, as a result of a trading hiccup in March that saw prices double to over $100,000 per tonne in a matter of hours, many dissatisfied traders, producers, and consumers are staying away from LME nickel and looking for different ways to price their contracts.
Assuming an elective builds up forward movement, the LME will battle further in its offered to reconstruct nickel volumes and liquidity, which have sunk since last Walk – finishing any desires for restoring the power of its agreement.
“For a few months, CME has been discussing this project with GCH. “One of the sources who has direct knowledge of the situation stated that CME wants a nickel contract and that they intend to base it on traded prices on GCH’s physical platform,”
“Volumes are decreasing and the LME’s nickel contract remains dysfunctional. There are a variety of prices.”
CME stated in response to a request for comment: We are unable to say whether we are working on any particular product.
Although GCH stated that its nickel platform, which allows buyers and sellers to trade directly with one another, would be live by the end of March, the company did not provide any additional information regarding the plans that the CME had in mind.
According to the sources, an index based on prices from the new platform would be used to settle CME futures.
After year-over-year losses of 51%, 54%, and 40% in November, October, and September, respectively, average daily LME nickel volumes have plummeted since March of last year. In December, these volumes decreased by 45% compared to the same time last year.
According to sources in the nickel industry, illiquidity meant that LME nickel prices frequently did not accurately reflect market fundamentals.
Only consumers, producers, and merchants who are directly involved in the physical market will be able to use GCH’s platform.
Because they are speculators, funds that are not involved in the physical market or algorithmic traders will not be able to use the platform.
The second source with knowledge of the situation stated, “When CME launches a contract based on the GCH platform, funds and anyone else who wants to trade or hedge have another international alternative.”
“The market requires a liquid contract at this time, and there aren’t really any alternatives to the LME contract.” A nickel contract is available on the Shanghai Futures Exchange (ShFE), but using it is difficult.”
Non-Chinese businesses find it difficult to use ShFE’s nickel contract because it is priced in yuan and requires them to be associated with a local entity.
Sources claim that CME discussed the possibility of a cash-settled contract for nickel sulphate, an intermediate product for the chemicals used in electric vehicle batteries, with participants in the nickel market the previous year.
Regarding its plans for a nickel sulfate contract, CME withdrew its response.
