Barclays quits LME open outcry

Nov 22 2012, 23:57 IST
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SummaryThe commodities operations of banks like Barclays face tough times and total commodities trading turnover for the 10 biggest investment banks has tumbled 20 percent in the first nine months of this year.

Major commodities player Barclays quit open outcry floor trading at the London Metal Exchange (LME) on Thursday, downgrading its membership at the world's biggest marketplace for industrial metals to cut costs.

The commodities operations of banks like Barclays face tough times and total commodities trading turnover for the 10 biggest investment banks has tumbled 20 percent in the first nine months of this year.

The British-based bank in particular suffered heavy losses in metals trading last year after it took bets in copper and aluminium that went wrong when markets lurched lower.

The LME, in the last stages of a $2.2 billion takeover by the Hong Kong Exchanges and Clearing Ltd., said in a statement Barclays had changed its membership status to Category 2, which allows only electronic and telephone trading.

Category 1 gives members the right to take part in open outcry trading at the LME building in London's Leadenhall St, which grants them greater visibility and immediacy, but brings costs roughly double those of dealing electronically.

Barclays remains deeply committed to the base metals market and the London Metal Exchange, which is one of our oldest and most successful franchises within our commodities business, the bank said in an emailed statement.

Some traders said Barclays' departure was bad news for LME efforts to preserve open outcry trade - increasingly a rarity in financial markets - which was strengthened with the recent entry of Jefferies Group after French bank Natixis pulled back from commodities broking.

They (Barclays) are one of the large brokers on the exchange and they give liquidity to other brokers on the floor, a senior source at a Category 1 broker said.

It is quite expensive to become a Cat 1 member. Their business still needs to be transacted and they will use other brokers no doubt but it's not a good day for the exchange.

Others were more sanguine on the move.

The vast majority of Barclays metals trading already flows through the bank's own electronic trading platform, BARX, a source close to the bank said.

There has long been speculation on the future of the LME ring, a circle of red leather benches where traders in business suits make arcane hand signals to their teams as they trade a range of timespreads as well as benchmark futures in metals also including tin, lead, zinc and nickel.

On Thursday morning, the ring-side booth formely occupied by Barclays was deserted, even as noisy trading continued.

Expectations that

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