The Globe and Mail

Last open-outcry trading floor in Europe to fall silent for good

Merchants function within the Ring, the open buying and selling ground of the brand new London Metallic Trade (LME) in central London on Feb. 18, 2016.

LEON NEAL/AFP/Getty Pictures

The London Metallic Trade plans to completely silence its frenzied buying and selling ground, often called the Ring, the place nattily attired merchants have helped set the value of every little thing from copper to zinc for greater than 140 years.

The LME mentioned on Tuesday that closing the Ring — a circle six metres in diameter with a crimson leather-based bench across the perimeter — was a part of an effort to modernize the trade and transfer towards absolutely digital buying and selling.

“The Ring is a significantly treasured side of the LME’s wealthy 144-year historical past, and its closure shouldn’t be a call we or our market will take evenly,” LME chief govt Matthew Chamberlain mentioned. “Nonetheless, the LME has stood the check of time exactly due to its means to adapt to the evolution of market dynamics and buying and selling behaviour.”

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The LME is Europe’s final open-outcry buying and selling venue, the place merchants shout and use hand indicators to position orders, and the Ring usually units the benchmark value for base metals. Most exchanges closed their buying and selling flooring years in the past, and the LME has confronted many years of debate about its future.

Face-to-face buying and selling has been banned on the LME since March due to the pandemic. That was alleged to be short-term, and Mr. Chamberlain insisted on Tuesday that COVID-19 didn’t play a task within the announcement. “Now we have been clear that we’ll not use the pandemic as a pretext to shut the Ring, and we stay dedicated to this,” he mentioned. Nonetheless, he added that since March, “digital pricing has served the market properly, with persistently excessive volumes of exercise.”

A lot of the buying and selling on the LME is already accomplished electronically, however closing the Ring will probably be a blow to traditionalists who’ve lengthy argued that it nonetheless has a task. Not like different commodity markets that usually use month-to-month contracts, the LME permits customers to lock in costs day by day out to a few months, weekly as much as six months and month-to-month for as much as 10 years. That flexibility produces a large number of advanced contracts, one thing supporters of the Ring say is properly suited to face-to-face buying and selling as a result of skilled merchants are higher positioned to thrash out costs.

Centuries of historical past are additionally at stake. The LME formally dates again to 1877, though its origins may be traced to the opening of the Royal Trade in London 1571, the place retailers started assembly frequently to trade commodities. By the 1800s, so many retailers had been utilizing the Royal Trade that some started establishing store in native espresso homes. The Jerusalem Espresso Home turned the favorite hang-out for steel merchants, and so they quickly got here up with the Ring. A service provider drew a circle within the sawdust on the ground and yelled “change,” a sign to anybody who wished to commerce to assemble round.

Over the centuries, the LME has held on to the Ring and its inflexible traditions. That features a requirement that merchants put on go well with jackets and hold their high button fixed. Additionally they can’t chew gum or get up, so as to not block the view of others, and their heel should at all times stay involved with the bottom of the crimson bench. Anybody violating the foundations may be fined. In 2014, 11 corporations, together with JP Morgan, needed to pay £13,750 in complete penalties for breaching the no-standing rule.

The LME additionally cracked down on liquid lunches in 2019 by banning merchants from consuming in the course of the day. The trade additionally launched a code of conduct geared toward stopping “threatening, humiliating or disruptive” behaviour. The code got here after the trade confronted criticism over a networking night on the Playboy Membership in London and different occasions involving strippers.

The proposals introduced by Mr. Chamberlain, which might take impact this summer time, have been partly pushed by the LME’s fading fortunes. The trade has confronted stiff competitors because it was acquired by the Hong Kong Exchanges and Clearing Ltd. in 2012, primarily from the CME Group Inc. and the Shanghai Futures Trade’s metals contracts. Final 12 months, the LME’s general buying and selling volumes slipped 7 per cent.

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Nonetheless, many merchants will lament the closing of the Ring. “It’s the top of a really lengthy period and a really unhappy day,” Nick Fellowes, managing director at Amalgamated Metallic Buying and selling Ltd., instructed Bloomberg Information. “We nonetheless have severe issues about how the trade will proceed to function effectively during times of illiquidity and uncertainty.”

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