Lithium liquidity jumps on CME as traders seek arbitrage plays

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Liquidity in CME Group Inc.’s lithium contracts is on the rise again, with financial players looking to benefit from arbitrage opportunities in the market that’s key to the energy transition.

“Liquidity brings in liquidity,” said Jack Nathan, head of battery materials at broker Tullett Prebon. Financial players such as funds “always look for liquid markets to implement strategies,” he said. The robust growth in liquidity in CME’s two lithium contracts comes as the Chicago-based bourse has been pushing to take on the London Metal Exchange in battery metals as the latter wades through the fallout of the nickel crisis in 2022 and western sanctions on Russian metals. In cobalt, another key battery metal, while total open interest and volume have slowed this year, CME’s cash-settled cobalt metal contract has grown sharply since its inception in December 2020.

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