Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Financial services firm Clear Street is looking to join the London Metal Exchange’s open-outcry trading floor, in a move that would bolster the prospects of the iconic “Ring” after a decline in volumes and a slew of departures in recent years.
New York-based Clear Street is seeking regulatory approval ahead of a planned application to join the LME, according to people familiar with the matter, who asked not to be identified discussing private information.
The move will be a key talking point among brokers at the industry’s annual LME Week gathering in London, which kicks off on Sunday. The trading floor was closed during the pandemic and reopened in a reduced capacity after lobbying from members, but activity has slumped, and doubts about its long-term future have returned to the fore after Societe Generale SA last month resigned its ring-dealing seat.
The bank’s departure left seven members remaining on the Ring, which 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.
Spokespeople for both Clear Street and the LME declined to comment.
Clear Street, founded as a clearing broker in 2018, expanded into US futures clearing in April, with Chris Smith — the founder of former Ring dealer ED&F Man Capital Markets — heading up the unit. It’s already active in commodities markets overseen by CME Group and ICE.
The firm is looking to grow beyond the US, taking its market operations to Europe and Asia, and has set out to achieve that goal by striking deals and recruiting high-profile talent. In July, it agreed to buy Instinet’s algorithmic-trading business, Fox River. Earlier this month it named Cboe’s former chief executive officer Ed Tilly as its next leader, taking over for co-founder and current CEO Chris Pento by year-end.
Other high-profile talent added to Clear Street’s roster include former Cantor Fitzgerald chief financial officer Steve Bisgay, who was named finance chief, and Morgan Stanley’s former head of prime brokerage technology, Jon Daplyn, who joined as chief information officer last year. Clear Street named Goldman Sachs Group Inc. veteran Atul Pawar chief risk officer in June.
The overwhelming majority of trading on the LME takes place on-screen or via phone and email. Ring trading accounts for a sliver of overall activity, but it still plays a key role in setting benchmark prices used widely by the physical metals industry. Prices that financial institutions use to value their contracts are set electronically at the daily close of trading.
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 are fewer than six members, or if the remaining members account for less than 75% of historically traded volumes. The exchange has this month embarked on a major overhaul that’s designed to boost liquidity in its electronic market, but it largely avoided making further reforms to the scope of trading on the Ring.
The last new member approved to join the Ring was Sigma Broking in 2022.
(By Mark Burton and Katherine Doherty)
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