The London Metal Exchange has decided to create its own clearing service called LMEClear, it announced on Monday, a move traders say is designed to make the exchange more attractive ahead of a potential sale next year.
Trades at the LME, the world's largest industrial metals exchange, are currently cleared through LCH.Clearnet, Europe's largest independent clearing house.
The decision to pursue self-clearing means the 130-year-old exchange will have greater control over new product development and more leverage in any potential sale.
The exchange also said it will introduce exchange user fees of 50 pence per lot from March for members to levy on client trades, in a bid to increase revenue.
Shareholders will be asked to consider the value of the business at some point in 2012, and it is important that they are able to compare incoming bids with the true value of the business, LME Chief Executive Martin Abbott said in a statement.
The introduction of the Exchange User Fee will allow the LME to operate commercially and to provide a commercial return to its shareholders while still operating a low-cost service, he added.
The exchange said it would begin the next steps of setting up LMEClear, including a tender process for suppliers of technology and treasury services and completion of the financing.
LCH.Clearnet could not immediately be reached for comment.
Traders said the hike in trading fees could bring the LME closer to levels of other exchanges and would help boost any price agreed for a sale. The member-owned exchange has kept fees relatively low.
They're probably looking to increase the revenue of the exchange so it looks attractive to potential buyers, a trader said.
They might want to raise them (the fees) in line with other exchanges, because the LME is still pretty cheap to trade compared to other exchanges.
The new fees amount to 25 pence per lot per side for segregated and non-segregated crosses. The current exchange levy of 5 pence per side for segregated and 0.005 pounds per side for non-segregated trades will be scrapped, the LME said.
(The LME) has been operating under a constrained profit model for a number of years ... but will need to generate more revenue in the period ahead if it is to continue both to provide members with the systems they need and meet likely increasing regulatory requirements, Abbott said.
The exchange has operated a dividend policy for several years, but a constrained profit policy necessarily creates a constrained dividend policy.
The exchange, due to open its data room to potential buyers this month, said it was still too soon to say whether its board would back a sale.
Abbott said in late September that the exchange had received expressions of interest from 10 or more suitors.
It is likely to be several months before the board is in a position to put any bid to shareholders, and it is far too early to say whether any such bid would be presented with or without a recommendation from the board, Abbott said in the statement.
(Editing by Jane Baird)