COPPER SEMINAR: Clients, market to suffer if LME changes margin model, panel says

Clients and ultimately the metals market will suffer if the London Metal Exchange's proposals to change its margin methodology go ahead, the heads of a number of brokers and trade users have said.

Speaking during a panel discussion at the virtual Fastmarkets Copper Seminar, executives noted that the provision of credit, granted by brokers to clients, was at the heart of the LME's franchise. But changing margin methodology would constrain the ability of brokers to continue this service, they added.
Nigel Dentoom, chief executive officer of Metdist Enterprises, the UK office of Minmetco, told the conference that credit facilities are an intrinsic part of the LME broker's offering and an embedded tool that assists the trade and industry to hedge its LME metal exposures, by way of financing initial margin and variation margin, effectively managing its cash flows.

"There is no doubt in my mind that if the LME switches from Discounted Contingent Variation Margin [DCVM] to Realized Variation Margin [RVM], that weakens the broker's ability to grant credit to trade customers. [This is] also applicable to investment customers, but it's...

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