In altering the rules, the LME was seeking the middle ground between its need to ensure no repetition of the Hamanaka debacle and widescale opposition to daily OTC position reporting by members following a consultation.

``I am happy that what we are asking for now will deliver what I want,'' the LME's director of regulation and compliance, Alan Whiting told Reuters.

At the time of the Hamanaka affair, which saw Sumitomo's rogue copper trader rack up losses of $2.6 billion and cause havoc on the LME, the exchange knew something was going on but did not know what was behind it and was unable to get people to tell them, Whiting said.

Now, under LME rules, members and affiliates would be required to give the OTC information if asked. Those that failedto do so would face stiff penalties.

``Firstly they open themselves up to discipline and second we have powers to close out positions which we would not hesitate to use,'' Whiting said.

But he said information would only be requested if there was concern that a market aberration was occurring.

A total of 19 companies responded to the consultation and all of them opposed routine reporting.

A majority, however, supported the LME compliance department having access to OTC information where it needed to identify or resolve a problem in the market, the LME said.

Respondents were concerned as to how the LME could compel members' affiliates to provide OTC information given that its jurisdiction extended solely to members.

They said regular reporting was too onerous and too costly and that computer systems could not be put in place in the time given to be millennium compliant.

The LME said members might need to enter into new arrangements with affiliates to comply with the amended rules.

Last week theLondon Bullion Market Association's (LBMA) chairman Peter Fava said the LBMA was concerned about the LME's ability to look into a member's OTC contracts.

Whiting said, ``We don't believe it will be detrimental to the silver contract in the slightest...Anyone doing responsible legal business should not be concerned about passing this very specific information on.''

He added, ``Clearly if it does not work and members don't comply then we may have to go further, but I think that is highly unlikely.''