Appendix 1 Summary of Feedback and Responses Proposal 1 Do you agree with the proposal to report Traded Options when matched on the market data feed LMEselectMD? Respondent 1 The respondent is in favour of this proposal. Noted. Yes Respondent 2 The respondent is generally in favour of this proposal but would like clarification on two points: 1. The respondent has concerns over the timescale for the implementation of the new reporting regime and has requested details of the reporting window far in advance of the implementation date. 2. The respondent would also like clarification that this proposal will only be for Member-to-Member trades. The LME acknowledges the respondent s comments and provides the following clarity on the two points raised: 1. The LME will provide at least three months notice before any agreed changes are implemented. 2. For consistency, the proposal to report Traded Options on the LME market data feed (LMEselectMD) will include Client trades. This is in addition to Member-to-Member trades for both the Inter-office and LMEselect trading venues. A similar approach will be taken with the proposal to report Futures trades, which will additionally include Ring business. Yes/No Respondent 3 The respondent is in favour of this proposal. Noted. Yes Respondent 4 The respondent agrees with the rationale to report transactions for Traded Options when they are matched on a real-time basis. However, the respondent s preference is to exclude Client trades from these reports. The LME acknowledges the respondent s comments. The LME believes that the inclusion of reporting Client transactions for both Futures and Options on a real-time basis, which is consistent with the proposal to report Member-to-Member transactions, will provide market participants with a more comprehensive and structured Yes/No
transparency regime for the LME. This in turn may promote and incentivise more participation on the LME. The LME would like to reiterate that Client and Member trades will not be displayed separately on the LME market data feed and there will be no trade-type identifier. Therefore, while there will be greater market transparency, it will not be possible to tell whether the reported trade is derived from a Client or Member. Respondent 5 The respondent is in favour of this proposal. The respondent references a previous correspondence from them to the LME and reiterates that Client accountability should be the same as it is for Members. The LME acknowledges the comments of the respondent. The LME would also like to further clarify that the proposal to publish transactions for Traded Options on the LME market data feed includes Client and Member trades for both Futures and Options on a real-time basis. The LME believes that this will provide a higher level of consistency and transparency for all market participants. Yes Respondent 6 The respondent is supportive in establishing a consistent approach to transaction reporting, but given client feedback received, believes further consideration is required to find a suitable solution at a time when the value of the LME client contract is being questioned. The LME acknowledges the comments of the respondent, but must consider under MiFID II it will be obliged to report transactions on a real-time basis. The LME believes that the inclusion of reporting Client transactions for both Futures and Options on a real-time basis, which is consistent with the proposal to report Member-to-Member transactions, will provide market participants with a more comprehensive and structured transparency regime for the LME. This in turn may promote and incentivise more participation on the LME. No
Respondent 7 The respondent has requested confirmation of the level of trade detail that will be published in the real time reporting of Traded Options. The respondent has expressed a request for a level of protection in favour of Market Makers, removing the Vol and Price of trades from the reports. The LME acknowledges the respondent s comments and would like to clarify that the following trade details will be reported: Trade Time, Metal, Description, Price and Size. The LME believes that a level of protection will be provided to Market Makers in the form of deferred publication of large trades. Proposal 2 Do you agree with the proposal to remove the logic to defer the reporting of large trades by 2 business days? Respondent 1 The respondent strongly supports this proposal. Noted. Yes Respondent 2 The respondent states that they have a preference to remain with the current logic of deferring large in scale trades for two business days. The respondent does note, however, that under new regulations for MiFID II this may not be possible. The respondent concludes that, until the new regulatory requirements are clarified, they feel that large trades should continue to be deferred for two business days. The LME acknowledges the respondent s comments. The LME will apply to the FCA for a waiver to enable it to keep the deferral for large in scale trades if it resolved through this consultation that this should be the way forward. At this stage the final details of deferrals permitted under MiFID II have yet to be clarified. No
Respondent 3 The respondent does not agree with the proposal to remove the logic to defer the reporting of large trades. The respondent further comments that the LME and Traded Options Committee spent considerable time debating and implementing the deferred publication of large trades. Therefore, the removal of this logic may question why it was introduced originally. The respondent also indicates that the current method protects the market makers position in a market which is not particularly liquid. The LME acknowledges the respondent s comments. If the LME does intend to continue with deferred publication under MiFID II, it will need to apply for a waiver from the FCA to continue with this method of reporting Options transactions that are large in scale. It will, however, be likely that the LME will still be required to publish price and instrument on the relevant trade day at 7.00 pm, with the volume being deferred until around 7.00 pm after two business days. No Respondent 4 The respondent is in favour of this proposal. Noted. Yes Respondent 5 The respondent does not agree with the proposal to remove the logic to defer the reporting of large trades. The respondent makes reference to previous discussions around the introduction of the deferred publication of large trades, and the subsequent amendments to the definition of large in scale trades. While the process originally deemed anything over 100 lots as a large trade, these thresholds were then adjusted following discussions with the Traded Options Committee. The respondent questions the LME s rationale in proposing to remove the deferred publication of large trades after only one year and asks for The LME notes the respondent s comments. The LME acknowledges that the introduction of this process arose from discussions within the Traded Options Committee and other market participants. The LME would like to note that when the deferral of large in scale trades was introduced, the full implications of regulatory change around this reporting methodology were unclear at the time. However, through discussions with market participants it was felt prudent to carry on with this reporting regime until a more suitable methodology could be considered at the appropriate opportunity. Through this consultation, the LME welcomes comments from market participants on this issue so the LME can gauge general views and opinions. The LME No
clarification on this. does have the ability to request a waiver from the FCA, although the exact details of any deferral that may be granted are unclear at this stage. Respondent 6 The respondent has no comment. Noted. Respondent 7 The respondent has no comment. Noted. Proposal 3 Do you agree with the proposal to decommission the batched Options Matched Trades reports? Respondent 1 The respondent supports this proposal and has requested that the LME works with Bloomberg to ensure that their LMPM page collates the realtime data correctly and in a timely manner. The LME notes these comments and is working closely with Bloomberg and other market data vendors to ensure that all relevant reports for Options matched trade data will be published correctly and in the appropriate format. Yes Respondent 2 The respondent supports this proposal. Noted. Yes Respondent 3 The respondent supports this proposal. Noted. Yes
Respondent 4 The respondent supports this proposal. Noted. Yes Respondent 5 The respondent has no comment. Noted. Respondent 6 The respondent has no comment. Noted. Respondent 7 The respondent has no comment. Noted. Proposal 4 Do you agree with the proposal to publish Options Open Interest on the next business day? Respondent 1 The respondent supports this proposal. Noted. Yes Respondent 2 The respondent supports this proposal but has a preference to remain with the current methodology of publishing Open Interest for large trades after two business days. The LME acknowledges the respondent s comments but would also state that from previous discussions a large proportion of market participants are in favour for the reporting of Options Open Interest on the next business day as this gives greater transparency particularly leading up to the relevant options expiry. Yes/No
Respondent 3 The respondent supports this proposal. Noted. Yes Respondent 4 The respondent is in favour of this proposal. Noted. Yes Respondent 5 The respondent has no comment. Noted. Respondent 6 The respondent has no comment. Noted. Respondent 7 The respondent has no comment. Noted. Proposal 5 Do you agree with the proposal to report Client Futures when matched on the market data feed LMEselectMD? Respondent 1 The respondent supports this proposal. Noted. Yes Respondent 2 The respondent supports this proposal. Noted. Yes
Respondent 3 The respondent supports this proposal. Noted. Yes Respondent 4 The respondent supports this proposal. Noted. Yes Respondent 5 The respondent has no comment. Noted. Respondent 6 The respondent has no comment. Noted. Respondent 7 The respondent has no comment. Noted. Proposal 6 Are there any other matters which you believe the Exchange should take into account in relation to the Proposals? Respondent 1 The respondent confirms their earlier point and has requested that the LME work with Bloomberg to ensure that the LMEO (Open Interest) and the LMPM pages are set up correctly and can display the data being sent by the LME in a timely and precise manner. The LME notes these comments and acknowledges the respondent s comments. The LME is already in constructive dialogue with Bloomberg and will work closely to ensure a successful implementation, if adopted. Yes
Respondent 2 The respondent has concerns over the number of reporting changes for LME products which is a burden on their internal resources. The respondent s view is that the LME should be focussing more on reviewing their settlement process. However, the respondent acknowledges that if these proposed changes are agreed as a result of general discussion and the views of the Trading Options Committee, then they will be implemented. The respondent emphasises that any reporting changes are clarified to the market and that the advanced notice of implementation is made transparent to the whole market. The LME notes and acknowledges the respondent s comments around the large number of reporting changes. However, the LME is looking to take a structured and comprehensive approach with the Proposals in this consultation which it believes will ultimately be more consistent and easier to digest for all market participants. In addressing the comments on settlement procedures, the LME has recently issued a decision notice on four enhancements that it believes will strengthen and enhance the determination of the Closing Prices for Traded Options. The LME also believes the procedures used both on the Ring and electronically for the determination of Futures Reference Prices are robust. The LME has introduced a number of rule and procedural changes both before and after the Board review of the Ring in 2014 that have strengthened the methodology for establishing both the Official and Closing Prices. Yes Respondent 3 The respondent indicates that they feel the LME should apply for a waiver to the FCA in order to allow the deferral of large trades to continue. The LME acknowledges the respondent s comments and any decision on applying for the waiver will come after the conclusion of this consultation. Respondent 4 The respondent has no further comment at this time. Noted.
Respondent 5 The respondent has no further comment at this time. Noted. Respondent 6 The respondent has no further comment at this time. Noted. Respondent 7 The respondent has no further comment at this time. Noted.