London 07/09/2015 - J.P. Morgan (JPM), one of the leading RDMs (Ring Dealer Member) on the London Metal Exchange (LME) open-outcry trading floor, is relinquishing its trading status on the ring, becoming an ABCM (Associate Broker Clearer Member) from Tuesday.
"With effect from Tuesday September 8, 2015, J.P.Morgan Securities Plc will be re-categorised from a Category One member to a Category Two member of The London Metal Exchange," the exchange said in a notice on Monday.
ABCMs have all the rights and privileges of LME membership, but cannot trade on the open-outcry floor. With JPMs exit, the number of RDMs falls to just nine - in the 1980s there were around 30 floor trading companies.
""As with all our members, the LME values JP Morgan’s participation in the LME market, which provides the most transparent and credible global benchmark pricing for the metals industry worldwide. We hope to continue to collaborate with JP Morgan and other LME users to develop our service and product offering to meet the industry’s evolving business needs,” LME CEO Garry Jones said.
The metal trading unit that became JPM dates back to the mid-1970s, when Germany's Metallgesselshaft became a ring trader. As MG Metals, it acquired several other companies, incliuding founder-member Rudolf Wolff and warehouser Henry Bath. MG itself was acquired by Enron, which in turn, was purchased by Sempra.
But it was the $1.7 billion purchase of RBS Sempra Commodities' European and Asian businesses in 2010 that grew the firm into one of the biggest players in metals and energy, rivalling Goldman Sachs, Barclays Capital and Morgan Stanley. It was the largest single shareholder when the LME was sold in 2012 to Hong Kong Exchanges & Clearing (HKEx).
However, in 2013 parent company JPMorgan Chase & Co. opted to pursue strategic alternatives for its commodities business, including its physical metal trading and warehousing operations.
This was because bank holding companies, such as JPM and Goldman, came under US political and regulatory pressure from critics concerned that bank ownership of non-financial infrastructure assets, such as metal warehouses, inflated prices for consumers, while also generating significant competitive and systemic risks.
In 2014 it sold its physical commodities business, including Henry Bath, to Mercuria Energy Group Ltd, but at the time retained the futures business.
The LME floor is the last of its kind in Europe - the exchange also operates an electronic market and an inter-office phone market. With RDM numbers in single figures, there are likely to be increased concerns over the viability of the open-outcry model.
But the LME re-iterated its committment to open-outcry. it is moving to new premises later this year, and these include a trading floor.
"The Ring will remain for as long as it continues to serve the market and the market continues to use it," Jones added.