They can be fined for leaving their seats during auctions, but the sharp suited traders at the London Metal Exchange may never return to their red leather benches, after the managers of Europe’s last in-person trading floor set out plans to move to electronic trading.
The proposals to close the Ring – known for its distinctive circle of red sofas – will be outlined in a discussion paper released by the LME on Tuesday afternoon.
It would mark one of the biggest changes to the world’s oldest and largest metal bourse since its founding in a City of London coffee house in 1877. The LME, which is owned by the Hong Kong Stock Exchange parent HKEX, hosts the last remaining open outcry pit in Europe.
Members usually set the world’s daily benchmark prices for industrial metals such as copper, aluminium and zinc by screaming buy and sell orders across the Ring during intense five minute sessions throughout the trading day.
However, the Covid crisis resulted in trades going completely electronic, giving members a glimpse into a future devoid of some of the more raucous scenes and quirky rules that the LME has become famous for.
While Ring-dealing members are technically allowed to stand up and lunge as they yell their orders, they have to keep one of their heels on the base of the famous leather couches. Standing breaches resulted in fines worth £13,750 being doled out to 11 firms including JP Morgan and Société Générale in 2014.
Members are banned from chewing gum and are expected to abide by a strict dress code, which includes keeping your top button fastened, your jacket on and hair presentable, or else risk being fined.
The proposed closure of the Ring follows a string of changes intended to shift the culture of the LME in recent years.
In 2019, it issued a daytime drinking ban for its 120 trading floor members, cracking down on a reputation for boozy meetings and liquid lunches chronicled by one of its former traders, Nigel Farage.
Ian Mason, head of the UK financial services regulatory team at law firm Gowling WLG, said: “Despite the pressures of the pandemic, it is sad to see this last bastion of the brokering process disappear.
“While the efficiency of electronic processing cannot be denied, the ‘brand image’ that has been characterised and sustained by this practice will be lost and while understandable in the current climate, it is inevitable that the move to electronic trading would take hold in all financial markets.”