HONG KONG (Reuters) - The London Metal Exchange said it has developed a new warehouse receipt system with a partner, which it intends to roll out globally and which could help advance its long held ambition to open warehouses in mainland China.
The electronic system would make it simpler to verify ownership of metal held in warehouses, easing concerns following a financing scandal in China that led banks to tighten lending to the sector, said LME chief executive Garry Jones.
"This system will make the whole process of warehouse storage, the audit and trailing of warehouse receipts much easier to understand and much more useful," Jones told a conference.
A metals financing scandal in the Chinese port of Qingdao last year rocked metals markets and forced banks to reassess their risk procedures, after cumulative losses among local and Western banks and trading houses topped $3 billion.
Jones said the new system should help free up liquidity by increasing confidence in the sector, and could help the LME's push to open mainland warehouses as part of its strategy of expanding into China.
"We think if we can offer more physical services in warehousing, it will certainly help that process," he said in remarks made after the conference.
The LME, which is fully owned by Hong Kong Exchange & Clearing Ltd (HK:0388), would use the new physical market service, called Sentinel, to expand its services into non LME stocks of metals and also potentially to other markets, Jones said.
The LME was also in talks with the bullion market to develop products around trading and clearing, he said, noting that there were no listed precious metals products in London.
The exchange was also awaiting regulatory approval from Europe for its plan to launch yuan cleared products, he said.
