So, the theatre is back. After eighteen months of silence and gathering dust, the trading floor in Finsbury Square is again echoing to the voices of dealers sitting on the red leather benches. Well, at least some of them; the number of floor-trading members is getting perilously close to the LME’s own, new, minimum requirement. When it closed for business in March 2020, the Ring had nine trading members. Now, with the defection of Triland to the (significantly more numerous) ranks of Category Two, each of those dealers is going to have an even bigger number of seats to choose from.
That decision by Triland was an interesting one. I would have estimated them as being one of those who would hang on to Ring status, as a real traditional LME outfit. But one has to assume that they took soundings amongst their (I believe) pretty substantial client base, not least their own parent group companies, and the fact that they have made that decision suggests that they have confidence that their Japanese base does not cleave immutably to the power of the Ring. I think this marks the first time in my career that there is not a Japanese presence – at the very least as a broker shareholder – amongst the Ring dealers. It’s not that many years ago that that thought would have been almost impossible. Still, I suppose a generation and more earlier, what I always regarded as normal would have been seen as highly unlikely.
But it’s difficult to see a coherence in the Ring membership now. The miners/smelters and oil companies of the seventies and eighties are gone, the banks of the nineties and two thousands are gone, AMT still flies a flag for the old-style specialist LME broker, but really, it’s a pretty disparate group. There may be a positive to that, as well as the obvious negative of split desires, since presumably those members will appeal to very different users of the market; let’s hope so.
It’s also – I would suggest – a pretty expensive operation to run, with only eight jolly jack tars up at the sharp end, and yet a bridge overflowing with personnel. Still, I guess they know their economics better than I do, but at what point do the non-Ring dealers start to get a bit twitchy about the fact that they may be subsidising a part of the enterprise to which they do not have access, and which their clients may – and I stress may – regard as non-essential?
It’s a tough position to be in, and I don’t envy Matt Chamberlain who has to navigate his way through these heavy seas. I also hate to be negative about something for which I basically have a great deal of affection. But I really can’t see that a split personality – between Official and Closing Price methodology – and a grand total of eight members in the Ring, can be a long-term viable proposition.
I hope I’m wrong, but I fear I’m not, this time.
Incidentally, in the first paragraph of this, I wrote ‘sitting’, but in the newspaper pictures on Tuesday morning, all but one of the dealers are clearly standing, not sitting in their seats…have the rules changed, or do they just not remember after an eighteen month gap????