LME Trading Floor Faces Fresh Blow as Societe Generale Exits
Societe Generale SA will withdraw from the London Metal Exchange’s open-outcry trading floor, in a move that will raise fresh questions about the future of the iconic “Ring.”
The bank’s UK unit will continue to serve clients as a clearing member of the exchange, but will pull out of the trading floor from August 27, the LME said in a notice to members. That will leave just seven members remaining on the floor, following earlier resignations by dealers including Triland and ED&F Man in recent years.
The future of the Ring has been a longstanding subject of debate at the LME. The open-outcry floor with its red-leather couches and hand-signaled trades is viewed by some as anachronism in a world dominated by electronic trading, and its role in setting global benchmark prices for the world’s key industrial metals has been reduced in recent years.
While many rival exchanges closed their open-outcry trading floors years ago, advocates for the Ring say it remains an effective mechanism for trading the LME’s unique and complex suite of daily, weekly, and monthly contracts. The floor has its detractors too, with critics including high-frequency trading firms arguing that its closure is long past due.
The LME has said that it will consider closing the trading floor permanently if there were fewer than six members, or if remaining members account for less than 75% of historically traded volumes.
“The LME confirms that neither of these Ring price liquidity event criteria have been met as a result of this announcement,” it said in the notice.
The historic institution traces its roots back to the early days of the UK’s industrial revolution, when metals producers, consumers and merchants would convene in a London coffee house and draw a circle in the sawdust to trade. Activity on the floor had been in a slow-burn decline long before the pandemic, with trading migrating to electronic systems and the so-called interoffice market, where deals are struck directly between members via phone and email.
The LME was forced to close the Ring during the Covid-19 pandemic, and moved to do so permanently after a successful migration to fully electronic pricing. It eventually reopened in a diminished capacity after an uproar from members, but trading volumes have fallen sharply since its reopening.
Societe Generale had retained a presence long after rival banks including JPMorgan and Barclays retreated, and its decision to withdraw leaves CCBI Global Markets as the only bank active as a ring-dealing member. Other floor brokers include Amalgamated Metal Trading, Marex Group, and Sucden Financial.
The decision will have no impact on headcount within Societe Generale’s metals team, according to people familiar with the matter. The bank will continue to provide clearing and execution services on the LME, and it remains committed to commodities and metals markets, they said.
