JP Morgan has withdrawn from the open outcry trading floor of the London Metal Exchange and will service its clients as a category two member of the exchange.
The move, which reduces the number of LME category one ring-dealing members to nine, comes amid an increase in the use of electronic trading activities by the bank to meet its clients’ needs.
The bank remains fully committed to its LME brokerage business, based in London and run out of New York by global head of commodities Michael Camacho.
“We’ve given this a lot of thought with the strong tradition and history involved. The reality is that our client preferences have shifted and a very high percentage of our LME contract volumes are now traded electronically, much of which is on the LME’s own platform,” Camacho said.
“We continue to be committed to facilitating LME markets through agency and principal trading,” he added.
JP Morgan inherited its LME ring-dealing membership and its associated client activity when it acquired RBS Sempra in 2010.
But the migration of trading activity over time to a variety of electronic platforms including LMEselect, the exchange’s own system, has reduced the bank’s need for a floor team as price discovery and execution for its clients have migrated online, people familiar with the matter said.
The majority of JP Morgan’s base metals brokerage activities are traded online.
The bank’s metals offering can be accessed through its live, bespoke trading platform with a dedicated resource team that facilitates electronic transactions during LMEselect hours.
The platform allows principal-to-principal transactions that interact with the LMEselect system, and also provides OTC Bullet lookalikes in precious and base metals.
The change in membership will not affect the bank’s client trading activities.
“As with all our members, the LME values JP Morgan’s participation in the LME market, which provides the most transparent and credible global benchmark pricing for the metals industry worldwide,” LME ceo Garry Jones told Metal Bulletin.
“We hope to continue to collaborate with JP Morgan and other LME users to develop our service and product offering to meet the industry’s evolving business needs,” he said.
Last year, JP Morgan joined a number of banks in pulling back from physical commodities activities amid an ongoing political debate in the USA over the role of banks in physical commodities. It sold a large portion of its physical commodities business, including its Henry Bath warehouse unit, to Mercuria Energy Group.
In 2012, Barclays and Natixis withdrew from the LME trading floor, followed in 2013 by Jefferies Bache. Last year, Newedge and Societe Generale merged their floor teams, with a new entity named Societe Generale Newedge remaining a category one member and Societe Generale switching to category two.
There has been an addition to the floor, however: in 2014, GF Financial Markets became a ring-dealing member.
The LME reiterated the exchange’s commitment to the open outcry trading floor, which will be relocated when the exchange moves from London’s Leadenhall Street to new, larger premises in Finsbury Square next year.
“The ring will remain for as long as it continues to serve the market and the market continues to use it,” Jones said.
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Andrea Hotter email@example.com Twitter: @AndreaHotter