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Société Générale has withdrawn from the London Metal Exchange’s historic trading floor, raising questions about the long-term viability of Europe’s largest open outcry pit.
The departure of the French bank on Friday took the number of members of the Ring, which has been open since 1877, down to seven, just one more than the minimum required to maintain it. SocGen was the last European bank to be an active member of the historic floor.
The move renewed speculation among London’s senior metals executives over the future of the Ring, which is known for its distinctive red sofas and trades in copper, aluminium, nickel, lead and zinc. It was only saved from closure in 2021 when a backlash from angry traders forced the LME to cancel plans to switch to an all-electronic system after the pandemic.
Traders using the Ring have long argued that it can set “official” prices, used by producers and consumers as the reference price for the delivery of physical metal in commodities contracts.
The LME’s electronic market sets the daily closing price and is used by banks, hedge funds and market makers to calculate the value of their portfolios.
“Because we are still Ring dealers, it gives us the ability to make prices,” said Marc Bailey, chief executive of member Sucden Financial.
“The legitimacy of the floor is really based on physical customers, who want to have a price they can rely on, that is not interfered with by electronic trading and algorithms,” he added.
Daily trading in the Ring is unlikely to change with SocGen’s exit, as traders estimate the bank handled only around 6 per cent of its volumes.
After the reprieve in 2021, the LME said it would consider closing the Ring if the number of members dropped below six, or if the trading volume of those members dropped below 75 per cent of the previous year. The LME said on Friday that neither of those conditions had been met after SocGen’s withdrawal.
SocGen declined to comment. The bank will retain membership of the LME’s electronic trading market and its clearing house.
“I don’t think this structurally changes anything, other than the optics,” said Christian Lusted, head of sales at Marex, another member of the Ring. “It is an important business for us, and will continue to be so.”
The other remaining members are brokers Amalgamated Metal Trading, Sigma Broking, StoneX, GF Financial Markets and CCBI Global Markets.
The LME, owned by Hong Kong’s HKEX, has weathered a series of storms in recent years including a nickel market crisis in March 2022.