The approach to derivatives trading in steel is likely to result in the London Metal Exchange offering a variety of different products, said Neil Banks, director of exchange development at the LME.

Speaking at the AMM Steel Success Strageties in New York Tuesday, Banks said that in finding a solution to providing financial instruments in steel, the exchange was considering "many derivatives that may include steel,"

He said that steel derivatives would provide a means of "transferring risk from those that don't want any risk to those that do."

He said that the LME was working with its pricing partner Platts in establishing benchmark pricing in steel. He said: "We see the benefit of benchmark pricing all the way down the chain." He said these prices would be "representative of the underlying asset class."

Banks said the LME chose Platts as its pricing partner because it was a "leading [reference pricing] provider in energy and petrochemicals" and that it had a "proven methodology" that was widely accepted "throughout the world."

Banks also said that the LME was working on methods to "detect manipulation, or attempts of manipulation."

He also said that steel had many similarities to oil in terms of the number of grades available, which made steel suitable for derivatives trading.