The LME, he said, continues to grow business in terms of participants and markets against the backdrop of difficult markets due to a slowdown in many world economies and a slowdown in velocity of trading in over-the-counter (OTC) markets.
Average daily volumes have been declining through 2016, most recently falling 11.4% year-on-year in September. Jones attributed the decline to several factors, one of which is a downturn in the physical markets that underlie the exchange’s trading contracts; many members, though, blame a rise in fees on short-dated carries, critical also to industrial clients that roll positions daily.
“Although it is not our role to predict where markets are going… [I] will say that what we have seen in the last couple of months is a pick-up in activity and funds retuning to the markets that haven’t been involved for some time,” he said.
Asset allocation generally for commodities has been underweight the last two years but Jones said the market is starting to see some rebalancing there and particularly back into metals.
“I have had a lot of discussions with fund managers who are asset allocators and they have said ‘[we are] now looking at it again. We think it is tied to real economy in different economies but we want to reassess’… from the client business that comes from our members, that that is certainly improving,” he told delegates.
This article was first published on www.fastmarkets.com.