London's new "mini" metals contracts started slowly yesterday as the market watched volumes to gauge their popularity amid some concerns about the robustness of the trading software, dealers said.
The London Metal Exchange's minis are cash-settled futures and based on the main futures contracts. They do not involve delivery of metals and are for five tonnes rather than 25 tonnes for conventional contracts.
"So far, we've had very light turnover on all of them, but it's only just started, at least they managed to get it going," a metals trader said. "There was a stoppage."
Trading on Select was halted at around 0720 because of technical problems and restarted at 0820. The minis started trading at 0830.
Select trading also was suspended in early November because of software problems which traders said were linked to the launch of minis. The LME gave no details about the problem, but decided to roll back to a previous version of its software.
The LME's initial mini offering includes copper, primary aluminium and high grade zinc.
The aluminium mini was probably the most actively traded by noon, with 260 March contracts changing hands compared with nearly 1,900 for the three-month deliverable. Both contracts were last quoted at around $2,820 a tonne.
"Trading is exactly as we anticipated," a LME spokesman said. "When you launch a new contract you would expect the market to grow steadily. We're clearly pleased with the way (the minis) are trading currently."
LMEminis were created to attract funds and other speculators making directional bets on base metals prices.
"People are watching to see how much interest there is in the minis, but it is early days," a metals trader at a US-based investment bank said.
"There are bound to be some teething problems, hopefully not too many. People are worried about whether Select will be able to cope with the volume."
Whether Select can cope with high volumes will ultimately determine whether the LME can compete with the New York Mercantile Exchange, which also has launched mini contracts on copper, aluminium, gold and silver.
NYMEX's Globex trading system can be used for large volumes, while traders say there are doubts about Select. Both exchanges are competing to attract funds and other speculators making directional bets on base metals prices.
"I'm not drawing any conclusions at this stage," an LME trader said. "I haven't really noticed much trading."
But some think the change is purely cosmetic. and that the market as it was served all those who want to trade metals futures.