London Metal Exchange cuts deal with banks to propel gold futures
By Peter Hobson
Thursday, February 23, 2017
LONDON -- The London Metal Exchange has reached a 50:50 revenue-sharing deal with a company founded by a group of banks to promote trade in its new gold futures contracts, sources said, aiming to overcome market scepticism surrounding their launch in June.
Usually, exchanges merely consult potential users about their needs when planning new financial and commodity contracts. But in this case the LME has opted for a radical departure from normal practice as it tries to grab a piece of London's $5 trillion-a-year gold market.
Sources close to the matter told Reuters that the five banks and a proprietary trader that are shareholders in the new company have undertaken to bring guaranteed minimum levels of trade in the gold futures.
Should they meet these levels, the project partners will receive a half share of the revenue under an incentive scheme designed to ensure the contracts have turnover, viability, and credibility from the outset.
"We're all committed to market-making and will at least bring our own trading book," said a source at one of the banks involved in the project. "It'll come with some built-in volume." ...
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