LONDON (CU)_Earlier this year, a proposal was made to move trading at the London Metal Exchange to an all-electronic platform. The move would have meant that the sharp suited traders would have never returned to their red leather benches where they shout buy and sell orders, setting daily benchmark prices for industrial metals including aluminium, copper and zinc. It would have also marked one of the biggest changes to the world’s oldest metal bourse since its founding in a City of London coffee house more than 140 years ago.
Although the LME has been trading electronically since March 2020, however, the proposal to continue all-electronic trading following the pandemic has now been rejected by some traders as Coronavirus restrictions continue to ease in the country. According to these traders, physical trading through shouting and hand signals was the best way to work out daily benchmark prices for metals. Therefore, a compromise has been reached, as parties have agreed to keep open outcry trading in setting official prices, although closing prices of the trading day would continue to be decided via electronic pathways.
LME’s chief executive, Matthew Chamberlain admitted that the members were divided in their opinion on ending physical trading. “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 said.
“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,” he added.
Accordingly, traders are expected to gather around the ring on 6 September, as physical trading is scheduled to resume on this day, providing dealers ample time to be fully vaccinated.
