The London Metal Exchange and its approved warehouse companies
are trying to negotiate their respective paths around the challenging
issues of client confidentiality and incentives that the LME’s new
warehousing deal has raised.
One of the requirements of the LME’s new agreement, which
warehouses have until February 9 to respond to, is stated in clause
9.3.2: “All warehouses must periodically supply to the exchange
information relating to all inducements paid to, or received from,
third parties… in the form and at the times specified by the
exchange.”
But client confidentiality is one of the foundations of warehouse
companies’ commodities business, where rebates and incentives
also play a part.
The LME, for its part, wants to attempt to ensure that inducements
and charges do not have a “manipulative, distortive or disorderly
effect on the market”.
This has raised serious questions for warehouse companies.
Should their private and legal business arrangements with other
firms be reported to a third party as a matter of course?
And what can they do to minimise the burden and scope of such a
requirement in the event it comes into force?
The London Metal Exchange and its approved warehouse companies
are trying to negotiate their respective paths around the challenging
issues of client confidentiality and incentives that the LME’s new
warehousing deal has raised.
One of the requirements of the LME’s new agreement, which
warehouses have until February 9 to respond to, is stated in clause
9.3.2: “All warehouses must periodically supply to the exchange
information relating to all inducements paid to, or received from,
third parties… in the form and at the times specified by the
exchange.”
But client confidentiality is one of the foundations of warehouse
companies’ commodities business, where rebates and incentives
also play a part.
The LME, for its part, wants to attempt to ensure that inducements
and charges do not have a “manipulative, distortive or disorderly
effect on the market”.
This has raised serious questions for warehouse companies.
Should their private and legal business arrangements with other
firms be reported to a third party as a matter of course?
And what can they do to minimise the burden and scope of such a
requirement in the event it comes into force?
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