Too much cheap money main problem facing LME

Financial regulation another key challenge, said CEO Martin Abbott.

"The real problem is there is just too much cheap money,” he said. “The single biggest factor in the rise in financing is central banks printing money.”

Abbott noted this may be starting to affect the copper market and disrupting access to copper. It is not, however, the job of the London Metal Exchange to intervene in market interactions, he said.

LME, which is owned by Kong Exchanges and Clearing Ltd, has adjusted warehouse load-out rates in April to permit easier access to copper. Abbott emphasized this will not fix the problem, however.

The main challenge now facing the exchange and its members is financial regulation, in particular unnecessary and politically-motivated regulation, Abbott said.

The new European Market Infrastructure Regulation will make it difficult for members who are less well capitalized to get credit from banks and other financial institutions, he said. EMIR revamps Europe's derivatives infrastructure.

Abbott said it is not the LME's responsibility to intervene in market forces that may have led to financing deals using metal as collateral, and that might have caused metal warehousing bottlenecks. These kinds of deals, which are common during an economic downturn, see more use of metals because they are a cheaper collateral alternative to cash.

Abbott said the first quarter of 2013, the first complete quarter under the ownership of HKEx, had seen trading volumes continue to rise.