The London Metal Exchange has enraged some members with its decision to stay open during Queen Elizabeth II’s funeral, further fueling tensions between the market and its users.
Metal brokers and customers have reacted furiously at the exchange’s 145-year-old decision to open its electronic market but close its famous pit on Monday. This means many traders will be operating as normal instead of being able to pay their respects to the late monarch. Trading on the London Stock Exchange, on the other hand, remains closed due to the bank holiday.
The decision further fuels tensions between the exchange, which is owned by Hong Kong Exchanges and Clearing, and the two camps of its main users.
On one side are longstanding members acting on behalf of users looking to buy the physical commodity, and electronic traders trying to profit from successful bets on the asset’s value and direction.
In March, the LME angered hedge funds and market makers when it canceled a trading day and halted trading in nickel for a week as the metal’s price doubled.
A group of five investment firms launched fresh legal action against the LME on Friday, months after hedge funds Elliott Management and Jane Street sued the exchange.
Metal industry executives privately wonder if the stock market would have taken the same course if the company at the heart of the short squeeze – Tsingshan – had not been Chinese. Last year, the LME was forced to abandon a plan to close its ring open pit and go fully electronic following complaints from users.
In a letter to members and warehouses, LME chief executive Matthew Chamberlain said the international nature of the market and the operational risks inherent in its short-term nature meant that the bank holiday had to be treated as a business day. The LME will also donate all fees collected on Monday to charity.
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“The LME has carefully considered how best to balance the interests of the market, our operational stability and our desire to pay our respects during the UK bank holiday,” the exchange said in a statement.
But Malcolm Freeman, chief executive of Kingdom Futures, a brokerage firm, wrote on LinkedIn that it was “appalling and would never have happened prior to HKEX.”
One market participant said the LME is pushing to go electronic but does not appear to have a system capable of moving settlement dates to Friday.
“I’m incandescent,” said the person. “They have a stock exchange in the west that is owned by the Chinese. The way they have acted in relation to nickel shows that they have no interest in running this exchange for the benefit of anyone here.”
Another participant agreed with the LME’s reasoning on operational risks, but said that ultimately they should have the electronic infrastructure to make the change. “Everyone is angry and disappointed,” they said.
Many UK companies, from Selfridges, Primark and John Lewis, close on the day of the funeral to allow staff to pay their respects, as does Lloyd’s of London and the Bank of England.
However, some UK-based markets remain open to international investors, including the futures markets for Brent crude, TTF gas and UK power, all operated by ICE Futures Europe.
For the LME, the unexpected bank holiday is unfortunate as Monday is the busiest day for the settlement of its most liquid contracts, which expire on the third Wednesday in September. This makes the tag crucial for creating monthly reviews.
Colin Hamilton, head of global commodities research at BMO, said the stay open is intended to “mitigate market distortions” amid liquidity challenges this year and the potential for short squeezes from depleted metal inventories.
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