The LME's owner, Hong Kong Exchanges and Clearing Ltd, has been striving to increase LME volumes and profitability following its $2.2 billion takeover in 2012.

The LME, the world's biggest and oldest market for industrial metals, said in a statement it aimed to allow category 3 and 4 members to trade on its electronic platform LMEselect in addition to category 1 and 2 members.

“Today’s proposals are crucial to our overarching aim to maximise liquidity and participation on the LME,” LME Chief Executive Garry Jones said.

“Opening up access to trading on LMEselect is beneficial to everyone trading on any one of our venues as it will bring more liquidity and price transparency to all.”

The LME wants to expand the number of category 3 and 4 members from the current combined six. This compares with 30 category 2 members who trade by telephone and LMEselect plus 10 category 1 members also do open-outcry ring trading.

The 138-year-old exchange hopes to attract more members by making membership criteria more flexible, which in some cases would allow exemptions from authorisation requirements by UK regulation watchdog the Financial Conduct Authority.

"We definitely expect to get more members and really where we expect to see the growth is in Cat 4," Matthew Chamberlain, head of LME business development, told Reuters.

One group the LME is targeting is overseas proprietary traders, he added.

"The Chicago prop shops are a good example. They're very interested in our market and we're confident that they'll trade a lot more if they can have direct access to LMEselect."

Another group are smaller London brokers who cannot justify being members of the LME's clearing house, but still want direct access to the LME's electronic platform. The top two categories of LME membership must be members of LME Clear.

The LME has launched a month-long consultation, which will also set out proposals to adjust the LME rule book to allow for incentive schemes for trading.

Some of the incentives seek to focus liquidity on one date a month to attract more financial speculators who prefer traditional cash-settled futures with a monthly expiration date.

This is in contrast to the LME's physically settled system, which allows a huge number of settlement dates that can spread out liquidity.

The LME plans to launch new contracts in October for steel rebar and scrap as well as aluminium premiums.

(Reporting by Eric Onstad; editing by Alison Williams and Jason Neely)

By Eric Onstad