‘Open outcry’ trading to restart at London Metal Exchange

Metals bourse, founded in 1877, reopens in September after member resistance to all-electronic trading

Last modified on Tue 8 Jun 2021 10.34 EDT

The London Metal Exchange, the last remaining in-person trading floor in Europe, is to reopen on 6 September after its management decided not to permanently close the trading ring, which has been operating since 1877.

The LME’s proposal at the start of 2021 to move to all-electronic trading following the pandemic was opposed by some traders.

The plan would have terminated the “open outcry” trading of the LME, where dealers set daily benchmark prices for industrial metals including copper, aluminium and zinc, by shouting buy and sell orders across the ring in intense five-minute trading sessions during the day.

The LME ring, operated with a strict set of rules, has been trading electronically since March 2020, but managers proposed in January keeping the ring closed even after coronavirus restrictions eased in an effort to modernise.

Some members of the LME, which is owned by the Hong Kong Stock Exchange parent, HKEX, insisted that physical trading through shouting and hand signals was the best way to work out daily metals prices. The changes would have meant a significant change to the world’s oldest metals bourse, which can trace its history back to its founding in a City of London coffee house more than 140 years ago.

In a compromise it has been decided to keep open outcry trading for setting official prices at lunchtime; the trading day’s closing prices will continue to be decided through electronic pathways.

The ring is scheduled to reopen on 6 September, as the LME predicts that its dealers will have been fully vaccinated by that date.

The proposals to end physical trading at the LME had split opinion among members, admitted the LME’s chief executive, Matthew Chamberlain. “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.”

He added: “However, respondents were constructive in proposing approaches to reconcile these differences, respecting the differing needs of the LME community, and preserving the unique and mutually beneficial blend of physical and financial market liquidity, which makes our market so special.”

The LME introduced several changes in recent years, including a ban in 2019 on daytime drinking among its predominantly male traders, although the participants are still required to follow a strict dress code and a quirky set of rules – including one saying traders can stand up and lunge as they yell orders but must keep one heel on the base of one of the ring’s red leather benches. A breach of trading rules or dress code can lead to a fine.

The LME will remain one of just a handful of in-person trading sites still in existence in the world’s largest financial centres, including at the New York Stock Exchange and Chicago Mercantile Exchange.

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