ED&F Man gives up LME ring status amid takeover talks with Marex

By Eric Onstad

LONDON (Reuters) - The London Metal Exchange (LME) has lost ED&F Man Capital Markets as a ring dealing member after most of its floor team resigned because they expect takeover talks with broker Marex to be successful, a source close to the situation said on Friday.

The two brokers said earlier this month they had entered into exclusive talks for the potential purchase of ED&F Man Capital Markets (MCM) by Marex.

MCM is the financial services division of ED&F Man Group.

Both brokers have special teams of traders that operate in the LME ring, the last open-outcry trading floor in Europe, but only one team would be needed if the takeover is finalised.

The source, who declined to be identified, said most of MCM's floor team left to take jobs with other firms since they expected to be laid off.

Starting Monday, MCM will no longer be a Category 1 member allowed to trade in the ring, the LME said in a statement on Friday, which leaves eight ring-dealing LME members.

In the ring, a circle of padded red-leather seats, traders use arcane hand signals during five-minute bursts of intense trading in copper, aluminium, zinc, lead, nickel and zinc.

MCM said it would remain an LME member, moving to Category 2 status. Category 2 members can trade for their own account and on behalf of clients using the LME electronic system and are members of the LME clearing house.

"The strategic decision will not impact on the firm's ability to provide customers with access to the LME or to continue to service its customers across a comprehensive range of products and services," MCM said in a statement.

Doubts have swirled in recent years about the future of open-outcry trading on the LME, the world's oldest and largest market for industrial metals.

Early last year, the LME launched a consultation on closing its open-outcry floor, arguing that the forced migration to digital trading was a success when the floor was closed during the COVID-19 pandemic, but faced heavy opposition from many traditional participants.

As a compromise, the LME switched to a hybrid system, using open outcry for official prices, but moving to its electronic system for closing ones.

Following the move, Triland Metals ended nearly half a century on the floor last August, but its departure was offset by a new addition.

In January this year, Sigma Broking Ltd became the first new LME ring trading member in 15 years.

The LME is owned by Hong Kong Exchanges and Clearing Ltd.

(Additional reporting by Pratima Desai; Editing by Louise Heavens and David Evans)