US bank JP Morgan is quitting open outcry trading on the London Metal Exchange after cutting back on its commodity business, a move that also shows the increasing importance of electronic dealing in metals.
The change reduces the number of financial institutions trading in the LME "ring" to nine and raises questions about the future of open outcry after most other markets have shifted to all-electronic formats.
The LME is the only exchange in Europe continuing the open outcry practice. During the rings on the LME trading floor, a circle of padded red-leather seats, traders use arcane hand signals during five-minute bursts of intense trading in copper, aluminium, zinc, lead, nickel and zinc.
The LME, the world’s oldest and largest market for industrial metals trading, affirmed its commitment to the open outcry rings in June last year, saying it would invest 1 million pounds (US$1.53 million) in technology.
At the time, it hoped to attract more ring-dealing members. But on Monday the LME said in a members’ notice that JP Morgan Securities would change as of Tuesday from Category 1 to Category 2 membership, which allows electronic and telephone trading, but not ring dealing.
JP Morgan said it left the ring because client preferences had shifted.