ondon Metal Exchange bosses have killed off plans to close the City’s last outpost of “open outcry” trading following uproar from brokers, traders and the metals industry.
The LME’s historic “ring” – where traders have been shouting orders to buy, sell and set prices face-to-face for 144 years – was closed last year due to Covid restrictions.
LME officials then launched a consultation on whether trading should move to 100% electronic for good, with the market’s managers clearly suggesting they were in favour of such a move.
However, today it announced the Ring would now be reopening on 6 September, with official prices of metals to be decided there, as they have been for generations.
Closing prices, however, will be decided electronically – a compromise that may ruffle feathers from users.
The LME also appears to have relented on its efforts to curb the practice of allowing brokers to offer margin trading for clients – effectively a form of credit financing allowing them to manage their cashflow and price risks during the course of their contracts.
The LME said it would “investigate a flexible approach to variation margin” supporting smaller physical users.
Brokers and other LME users speaking to The Evening Standard had told of their outrage at the proposals, with many claiming the market was using the cover of Covid as an excuse to close open outcry trading.
They said the electronic version of trading that the LME was proposing to take it over simply could not cope with the unique complexity and flexibility that the LME offers customers.
Unlike any other market in the world, the LME will price metals contracts to any future date the client wants. That creates a degree of variability that, traders say, requires human input to get accurate prices.
They warned the market that ridding it of that uniqueness would simply drive business away from London.
Benchmark pricing for metals around the world are currently set at the LME but could easily be lost to other exchanges in the US or China without the Ring’s unique input, they argued.
Matthew Chamberlain, chief executive of the LME said: “The divergent views in response to the discussion paper were particularly apparent between traditional participants and some smaller physical clients on the one hand, and our larger merchant trader and financial participants on the other.”
Chairman Gay Huey Evans said the paper had “aired a very constructive debate.”