JPMorgan Chase is quitting open outcry trading on the London Metal Exchange after reducing its commodity business.
The move will reduce the number of financial institutions trading in the LME “ring” to 9, including Societe Generale SA, Sucden Financial Ltd. and INTL FCStone Inc.
It is the latest move, announced by the LME on Monday, to raise questions about the future of open outcry trading on the LME 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 hand signals during bursts of intense trading in copper, aluminum, lead, nickel and zinc.
The LME is the world’s oldest and largest market for industrial metals trading and it reaffirmed its commitment to open outcry rings in June, saying it would invest 1 million pounds 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.
The decline in LME members poses a risk to liquidity on the exchange, Stephen Briggs, an analyst at BNP Paribas SA in London, told Bloomberg News. Historically the ring has previously had 10 to 12 members.