LONDON: The shouting will resume on Sept 6, when the nine ring-dealing members of the London Metal Exchange (LME) take their red leather seats after more than a year’s coronavirus-induced break. It is an unexpected outcome.

When the LME proposed closing the 144-year old bastion of open outcry trading in January, few in the metals trading community expected it to survive.

But industrial users have rallied around the ring. The exchange received an unprecedented 192 responses to its discussion document, mostly from the physical side of the market and mostly negative.

It’s not just the ring. Trade users don’t think much of the LME’s other proposed changes either. A “disaster” was how Liangmin Gu, head of the London office of Chinese state trading company Minmetals, described the plan to switch margining methodology. The common concern among industrial users, often smaller companies with limited balance-sheet muscle, is that they are being pushed aside in favour of bigger financial players with their promise of increased exchange volumes.

So the LME’s backed down. The ring returns, but under potentially much reduced circumstances. It feels more like a stay of execution unless there’s a radical rethink about how open outcry fits into the LME’s curious ecosystem.

The LME remains convinced “that electronic pricing for reference price generation will result in improvements to the integrity of the reference price, through an increase in direct participation and enhanced transparency.”

But the exchange has politically snookered itself. When Matthew Chamberlain took over as LME chief executive in 2017 after an earlier bruising battle between modernists and traditionalists, he pledged that the first of the exchange’s “guiding principles” would be to “protect those features that are core to the LME’s market and its physical user base.”

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