On a single day in mid-September, more than $130bn in metals changed hands in London. About 1.8mn contracts in copper, aluminium and other metals traded on the London Metal Exchange on September 15, according to statistics released last week. It was a record in the exchange’s 140-year history and triple the normal level of daily activity.
About $37bn of aluminium and $48bn of copper changed hands during the day. The volumes included so-called position transfers, which allow preexisting client positions to be moved in batches between clearing members, according to Miriam Heywood, a spokeswoman for the bourse.
The LME doesn’t identify the parties involved and it’s unclear what their motivations were behind the deals. Traders interviewed by Bloomberg News hadn’t heard of the big trades. It’s not unusual to see large, one-day spikes in trading on the LME. The previous record was set in February, when position transfers also boosted volume.
Overall, volumes on the LME increased last month amid rising metals volatility. Total trading jumped 16% in September to 749,103 contracts, the highest since 2015. Excluding September 15, the average daily volume was still 7.6% higher than the previous month.
The data also points to a steady revival of activity on the LME after a 12% drop over the previous two years. Metals have regained popularity among investors on tightening supply and demand dynamics, bolstered by the weaker dollar. Zinc prices are at a decade-high and the cash-to-three month spread is in backwardation, while copper is near a three-year peak.
“It does add to the buoyancy of the market, and it’s something we’ve been missing in the past few years,” said Michael Overlander, chief executive officer at Sucden Financial and a ring-dealing member of the LME.
Rising volumes bode well for CEO Matt Chamberlain, who took the helm of the exchange in April and announced a slate of changes last month to win back business from traders angered by higher costs and the rise of algorithmic trading.
Trading on the LME’s electronic platform was down slightly on the month. The venue is preferred by algorithmic traders and short-term investors, but smaller in size to the inter-dealer telephone market often used by banks and brokers to carry out large or illiquid trades, often on behalf of major producers, trading houses and hedge funds.
Figures for deals carried on the LME’s open outcry trading floor weren’t available, but anecdotally, ring-dealing firms like Sucden are seeing an uptick. That could suggest additional trading by traditional merchants and industrial clients. “Our team on the floor have certainly been kept quite busy, and we’re also seeing more interest in the options market,” Overlander said.