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Statement on London Metal Exchange interim measures direction

2 March 2006

The OFT is issuing this statement in order to clarify the position in relation to the interim measures direction issued to the London Metal Exchange on 27 February.

The OFT issued this direction to the LME on the basis of the information available to it as to the near complete elimination of competition in electronic trading for non-ferrous metals contracts that would likely result from the extension of LME Select's trading hours. This direction was issued by the OFT at the earliest possible opportunity following the firm announcement by the LME on 23 November 2005 of the date on which LME Select's trading hours would be extended and receipt of persuasive evidence from Spectron on 3 February 2006 as to the likely effect of the extension. 

Before issuing the direction, the OFT consulted with both parties and considered carefully the need for the proposed measures. The key factor in the OFT's consideration was that the direction was necessary to protect the wider public interest in maintaining as competitive a market as possible. The OFT considered that unless it granted the interim measures direction, it was likely that serious and irreparable damage to Spectron and the competitive process would arise that could not likely be subsequently remedied. The OFT would not have made this decision if it did not have serious underlying concerns about allegations of predatory pricing on the part of the LME.

The OFT understands that Spectron issued a statement to its LME customers on 1 March indicating that it had withdrawn its request for interim measures in light of changed circumstances. The OFT is seeking urgent clarification and explanation from Spectron and the LME in relation to the current position.   

At this point in time, the interim measures direction remains in force pending completion of the OFT's urgent consideration of this issue in the light of the latest developments. The OFT will have to take account of the wider public interest in that consideration.
 
NOTES

1. The interim measures direction issued to the LME prevented the LME from implementing an extension to LME Select's trading hours (from 07:00-19:00 London time to 01:00-19:00 London time).

2. On 23 November 2005, the LME formally communicated to certain categories of its members its intention to extend the trading hours of LME Select from 1 March 2006.

3. The full information set on which the OFT relied in order to take its interim measures direction only became available to the OFT on 3 February 2006. Given the urgency of the situation and mindful of the likely impact on the LME and the markets, the OFT issued a provisional notice to the LME indicating its intention to make the interim measures direction on 13 February. The LME exercised its right to make representations on that proposed course of action. Again, the OFT moved rapidly to final decision in the interests of providing clarity for the LME and its customers.

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