The 123-year-old exchange, which handles $2 trillion of business a year, is reshaping its structure and business methods to meet the challenge from new, on-line markets to its dominance of global metals.

"The LME has taken today one of the most significant decisions in its long history...today's vote marks the start of a process of change and a new way for the exchange to serve the market and its members," said the LME's Chairman, Lord Bagri.

The LME will become a shareholding entity, setting up a company known as LME Holdings Ltd by January 2001.

Bagri will remain as Chairman until December 31, 2002, and oversee the shake-up, which aims to introduce Screen trading outside the traditional open-outcry sessions later this year.

Separately, the exchange also said it was appointing OM Technology, a unit of Sweden's OM Gruppen, to develop its Screen trading system.

"The technological revolution and the speed of change in business practice has meant that the LME has to reinforce and build on its great success to take on new challenges in the market place and explore additional avenues of enterprise," said Bagri, who owns the multinational Metdist Group and has been associated with the exchange since 1970.

Screen start-up
Electronic exchanges have been throwing down the gauntlet, with e-commerce firm EMETRA openly seeking to wrest supremacy from the LME. EMETRA - founded in February as a joint venture between leading non-ferrous metal trading company Enron Metals (formerly MG Plc), Internet Capital Group and Safeguard International Fund, LP - will launch its physical trading platform later this year. It plans to go live in a joint-venture metals derivatives trading site with Germany's Deutsche Boerse in January 2001.

The LME said OM would provide the Screen trading technology, selecting it over competition from the other finalist Computer Sciences Corporation of the United States.

But some say the LME must move fast to assert its dominance as electronic competitors such as on-line metals broker Spectron Futures Ltd are already heavily used outside of open outcry. Spectron said last week the total traded value of its electronic trade in LME contracts had passed $1 biillion in two months of operation.

According to the managing director of an associate broker clearer member, the Spectron system is already becoming the most frequently used system in the pre-market and at lunchtimes for much of the trading of LME three-month contracts.

"I wouldn't underestimate the hurdles they (LME/OM) are going to have to overcome to get this thing up and running," Gavin Gross, head of LME metals at Spectron, said.

"Down the road we'll compete side by side with them. But I think that we'll offer a sufficiently different kind of service that we'll still attract LME members."

Many see the start of electronic trading as marking the demise of shouting orders across the floor of the LME ring.

"There's still a lot of support for this system, but in the end it will probably go," one dealer said.

And a senior ring dealing source said, "As a ring dealing member all we have is the assurance that the rings will continue as long as the members want it."