The City’s last ‘open outcry’ trading ring at the London Metal Exchange could close permanently

The City’s last open outcry trading ring – at the London Metal Exchange (LME) – could close after 144 years.

The site where traders shout at each other across the floor to set the world’s metal prices has been shut since Covid struck in March.

But bosses at the LME now believe it is the ‘right time’ to permanently close the open outcry structure – known simply as ‘The Ring’.  

While closed due to the pandemic, the Finsbury Park-based exchange has modernised trading to keep in line with social distancing measures.

Under the plans the LME will move away from open outcry trading and towards an electronic system – like those used in other industries such as share trading.

However metal brokers are likely to resist any changes – with many enjoying the rowdy trading and claiming it is the best way to set LME’s complex system of futures contracts.

Many say it serves the industry as well today as it did in Victorian times, doing £38billion of trades a day.

And the announcement of the plans come as experts predict a global boom for the metal trading industry.

A spokesperson for the LME said: ‘We believe it is the right time to consider the permanent closure of the Ring and a move to an electronic pricing structure

‘This shift is expected to benefit the market by broadening direct participation during the price discovery periods and increasing overall transparency.’

LME chief executive Matthew Chamberlain said: ‘The Ring is a greatly treasured aspect of the LME’s rich 144-year history, and its closure is not a decision we or our market will take lightly.

‘However, the LME has stood the test of time precisely because of its ability to adapt to the evolution of market dynamics and trading behaviour.

‘For the last 10 months, the Ring had to be temporarily closed due to the global COVID-19 pandemic.

‘We have been clear that we will not use the pandemic as a pretext to close the Ring, and we remain committed to this.

‘However, it is fair to observe that this period of electronic pricing has served the market well, with consistently high volumes of activity in the pricing window, easily observable by all stakeholders, and more participants with direct access.

‘Given the data, and our industry’s continued move towards digitisation and greater transparency, we believe it is now time to consider the long-term future of pricing at the LME – with the intention of providing certainty, which will allow all customers to make their future business decisions with confidence.’

City commentator David Buik said: ‘Tragic but with the advent of technology, the LME has done well to hang in there for so long.’

In the trading pit – the Ring – brokers huddle together on circular red sofas to decide the final price. But it has been criticised for being outdated and not female-friendly.

Closing the floor instead pits them against sophisticated algorithmic traders and big banks. 

City commentator David Buik said: ‘Tragic but with the advent of technology, the LME has done well to hang in there for so long.’

Meanwhile, Nick Fellowes, managing director of Amalgamated Metal Trading Ltd, told Bloomberg: ‘It’s the end of a very long era and a very sad day.

‘We still have serious concerns about how the exchange will continue to operate efficiently during periods of illiquidity and uncertainty.’ 

The LME is owned by HKEX, the owner of the Hong Kong Stock Exchange, which bought it for £1.4billion in 2012.  

The exchange famously has strict rules on dress code and conduct, which includes keeping your top button fastened, your jacket on and hair presentable. Members are also banned from chewing gum.

Those who breach the codes can be fined for doing so.