Discontent between the exchange and its more “traditional” members has been rife this year amid complaints that fee increases had damaged business, while profits and volumes on the exchange have fallen.
Speaking at the LME Dinner on Tuesday November 2, LME ceo Garry Jones told attendees that the exchange would do everything in its power to communicate, listen and adapt.
The LME's ceo, Garry Jones
"It often takes humility to admit that things haven’t gone as well you hoped. Make the changes and move on and don't dwell on the past," Jones said.
Relations reached a nadir in June – just ahead of the LME Week Asia – when it was revealed that former LME ceo Martin Abbott had been tapped by several members to investigate setting up a rival exchange. This put the exchange in the unenviable position of having a very public toe-to-toe with its members.
"The LME would not accept that the downturn in business was solely down to fees, while the members would not accept that it was due to economic decline. A lot of these issues surfaced during LME week Asia but, hopefully, we can use LME London to bring everything together and in a good place for 2017," a source said.
But tensions had been simmering for a while. The LME, they said, was warned back in 2014 that there would be ramifications for raising fees.
Although the LME announced a fee decrease for its nearby dates after LME Week Asia alongside other measures including potential decrease in instant margining, members were nonplussed.
And when Charles Li, ceo of LME parent Hong Kong Exchanges & Clearing (HKEX), this week asked LME members not to "rock the boat every day", those members retorted that they were most at risk of being capsized.
"That is what we are facing every day – we are not making it up," a second Category I member said.
On Tuesday this week, however, the LME seemed to be in a more conciliatory frame of mind.
"It has been a challenging year for relationships with the exchange and its members. When I started [at] the exchange three years ago I promised 'evolution not revolution' and I did mean it," Jones said during his dinner speech.
And while he also said that businesses must change to stay ahead, he also noted that no business can operate in complete isolation.
"I recognise that the LME has to carry its members with it. At times it must have felt like revolution and not evolution… It wasn’t our intention and I do believe that things have improved over the last few months," he said.
"But we do understand that the changes that don’t benefit the members or the industry as a whole will not benefit the LME [over the] long term either," he added.
When the LME was sold in 2013, a user committee group was set up to provide members with a medium to give opinions on the exchange.
Several members said they hoped the committee groups would have more gravitas; one suggested that metal-specific practitioners be brought in at a consulting level.
"I hope in the not so distant future the exchange will hire someone as an advisory perspective or co-op someone on to the board that understands the uniqueness of the LME," a senior member said.
"It would [be good] to get someone who is relevant because if it's just someone that did a metals job 20 years ago that is not going to be helpful as the market has changed. But, as a result in the consolidation in metals, there are people that would benefit from working with the LME," the first Category I member said.
There was universal agreement among polled members that business levels must improve; they would also welcomed more dialogue with the exchange.
The danger is that a further worsening in the relationship between the exchange and its members pushes business to its rivals.
There have been no fresh developments on the Abbott-led trading platform for several weeks. Some members said that it was still very much under review while others suggested it was used simply as a stalking horse to highlight member discontent.
"Even if the Abbott platform doesn't take off, someone else will be looking. It is logical to believe that they are – if the first door doesn’t open then they will keep trying the second and third door and will keep going – I do believe that," the second category I source said.
But ideally the LME will prosper – as Jones said in his speech, quoting Oliver Goldsmith: “Our greatest glory is not in never failing or falling but rising every time we fall."
The London Metal Exchange and its members are hopeful that the end of LME Week will draw a line in the sand following a year that has strained relationships.