The London Metal Exchange (LME) today published a roadmap setting out its proposed plan to modernise its options market.

It provides clarity on the immediate plans to automate the expiry process and deliver electronic options, both of which will help enhance liquidity and transparency, ultimately broadening market participation.

Options are used by a wide range of LME market participants, including producers, consumers, intermediaries and financial participants, to help manage risk. Currently, they are only traded through the inter-office market, but the launch of the LME’s new trading platform has laid the foundation to build an electronic options market and the functionality that it requires.

The LME intends to take a phased approach to implementing the changes, although the final timetable and proposals will remain subject to further consultation and regulatory engagement:

Early H2 2026

• The first step will be the introduction of automated expiry for LME options, the consultation for which will be published later this year. This will simplify and standardise the expiry process, removing the operational risk and complexity of the current manual processes. It will also align the LME with global best practice and provide greater certainty for participants.
• Previous market feedback indicated support to move from the current American expiry style (that can be exercised on any day up to the expiry day) to a European expiry style that only allows the option to be exercised on the expiration date. The LME proposes to make this change at the same time as automated expiry.

Late 2026

• Outright options, quoted in premium terms, will become available on screen. The LME believes that this will complement the existing bilateral inter-office market and align the LME with other markets. Electronic options will provide greater standardisation and intraday transparency, reducing barriers to entry and making the market more attractive to a broader range of market participants.
• The launch of onscreen options will be accompanied by a number of features including mass quotes and market maker protections. The LME will also introduce a liquidity provider programme to support onscreen liquidity and intraday price transparency.

2027

• The LME will continue to introduce further changes after options become available on screen. These will include complex strategies, more sophisticated market maker protections and changes to end-of-day pricing.

Jamie Turner, LME Chief Operating Officer and Head of Trading, said:

“The successful introduction of our new trading platform has opened the door to developing the electronic options market at the LME and today’s paper sets out a clear path forwards for the market.

“The market will see a steady stream of enhancements starting with auto-expiry and then outright options on screen. We know that members and market users are enthusiastic about the plans and we will work closely with them as we move to delivery.”