London Metal Exchange moves home

Europe’s last old-school trading floor

LONDON, Feb 21, (AFP): London’s metal traders used to conduct their business in a rowdy coffee house. Two centuries later, they are still shouting across Europe’s last open-outcry trading floor but in a plush new hi-tech office.

The heart of the operation is a circle of red-leather benches -- the “Ring”, where stressed-out traders crowd round to buy and sell and in the process set daily global prices for copper, aluminium or zinc.

The “Ring” tradition dates back to the early 19th century when a trader would draw a circle in the sawdust on the floor of the Jerusalem Coffee House in the City and take bids from surrounding merchants.

The London Metal Exchange was formally established in 1877 and initially occupied offices above a hat shop, using a telegraph for its international contacts.

The world’s top metals trading floor has moved four times since then, with its latest incarnation in a newly-opened three-floor office on Finsbury Square in central London.

“LME was growing from 82 people in 2011 to 350 today,” said Garry Jones, the LME’s chief executive.

Every day between the trading hours of 11:40am and 5:00pm dozens of traders -- most of them men in suits -- can be seen shouting out their buy and sell orders.

Access to the “Ring” is restricted to nine “Category 1” trading houses including Sucden Financial, Triland Metals and China’s GF Financial Markets (UK).

Electronic trading, which is now standard practice on US commodity trading floor, is available here too but Jones said: “We will not close the ‘Ring’”.

“We are an industrial market and people trade in different ways,” he said.

Hong Kong Exchanges & Clearing Limited bought the LME in December 2012 and promised to keep the tradition of open-outcry trading until at least 2015.

It has since said it will continue it indefinitely.

The new trading floor was thought of as an “integrated structure” allowing different markets -- physical, phone and electronic -- to connect.

“The markets are symbiotic and that needs to happen much more efficiently than it used to,” said Stuart Sloan, the LME’s chief operating officer.

Every base metal traded -- mainly copper, aluminium, nickel, tin, zinc and lead -- gets its price fixed daily within a few minutes in a flurry of activity.

When the shouting in the “Ring” gets too intense, traders outside it resort to elaborate hand gestures to make themselves understood.

“It allows the people in the Ring to hear each other,” said Peter Childs, head of price discovery at the LME.

“It’s a way of reducing the noise level behind the ‘Ring’ and getting orders back quickly.”