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Broadcast
15th September 2000
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LONDON
METAL EXCHANGE VOTES FOR DEMUTUALISATION
The problems facing the London Stock Exchange highlight the way
traditional markets are adapting to competition from their peers.
The London Metal Exchange, or LME, is no exception. Its members
have now abandoned the structure that has served them 123 years
- as our reporter Mark Ashurst explains:
"On a busy day, base metals worth more than $10 billion change
hands on the London Metal Exchange. Its prices set the benchmark
for base metals trading around the world, and its principal clients
include the world's biggest metal producers on five continents.
"But traders - including the elite group of so-called "Ring
Members" who still trade physically on the floor of the LME's London
offices, voted to demutualise. They will abandon their cooperative
style structure to become a company, and issue shares to all their
members - weighted according to their dominance in the metals trade."
Mark Ashurst spoke to John Pizzey of Alcoa, but first Lord
Raj Bagri, the LME chairman, told Mark Ashurst what he felt about
the decision:
"I am glad to say that we had overwhelming support. It is a major
change as far as the LME is concerned but it also demonstrates that
over the last 120 years or so, there have been a number of occasions
when the LME has been required to change. To me, the challenges
are in the market place and we have never hesitated to make that
change."
This is the largest metals trading market in the world, with a turnover
of up to $10 billion a day. Mark Ashurst asked how the prospects
of the LME had improved?
"We will still remain a shareholder-owned private limited company.
We are not seeking any outside capital but we felt that if we are
going to invest substantial sums of members money in technology
and other developments, then we should clarify the ownership structure.
"Also, over a period of time, different categories of members with
different rights have evolved and the time had come to try to harmonise
these various categories of membership and to make sure that what
may have been an ad-hoc development over a period of time, is then
brought to an even keel."
Mark Ahsurst replied: you are by far the biggest player in metals
trading, were the challenges ahead primarily to do with adopting
new technology, to see off competition from the internet and other
markets?
"We are very comfortable with our present trading system but,
at the same time, we do not have the luxury of taking chances with
what may happen. These things can change very quickly."
This vote coincides with the shareholders meeting of members of
the London Stock Exchange, by changing your structure now did he
hope to avoid the kind of strategic problems that they were encountering?
Mark Ashurst asked.
"The LME has always prided itself in the fact that it has always
listened to its members. Obviously they read newspapers and they
see what is happening to the governing structure in other areas,
and today’s vote shows the unanimous support of even the categories
of members like the Ring Members, whose enshrined rights are being
diluted in a very significant manner."
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Ring Members have also voted unanimously for this change.
That shows the confidence they have in going forward.
Sir
Raj Bagri |
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"Today's vote puts the London Metals Exchange on a new footing
- but the difficult decisions, regulating technology, and even mergers
with other markets, are still to come. One of LME's biggest customers
is the world's biggest producer of primary aluminium - the Australian
group Alcoa.
"John Pizzey, president of Alcoa's primary products division,
says the vote leaves the exchange in a stronger position:
"There is change coming. The history has been very successful for
the LME but, there are many issues facing the industry into the future.
We needed to make it an effective group, we needed to make it focused
on those who have a real interest in the LME. This structure does
all that so it is a very complex issue but this is what the structure
for the future is about. It is what everyone is doing."
And those changes looming ahead are primarily driven by technology?
Mark Ashurst inquired.
"There are two issues here; it is structure to address the future
and technology to address the future, they come together but they
are separate events. What you have done is concentrated into a smaller
group. The big old LME was great for what was in the past. You now
need a focused group to address very serious issues, you do need to
get focused, that is what the smaller LME board does."
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There are two issues - the structure to address the future
and the technology to address the future.
John
Pizzey
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Mark Ashurst asked where the big players had more influence on management.
"If you look at the structure of the LME now, there is a great
balance within a group of 13. I do not really see this as any one
group getting the upper hand."
The vote took place on the day of the annual general meeting of the
London Stock Exchange. Did John Pizzey think that had been an example,
a warning perhaps to members of the metals exchange?
"This has been heavily discussed for more than a year. I think
this is very different and addressing different issues, and I do not
see a merger looming ahead with any of the other major exchanges."
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What is in the future is in the future; that is what this
small concentrated board will address. john
Pizzey |
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| The
Markets: 01:39 GMT |
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FTSE |
6406.80 |
-11.00 |
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Dow Jones |
12525.7 |
-48.11 |
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Nasdaq |
2467.70 |
-9.91 |
| Data delayed at least 15 minutes. |
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| Internet
links: |
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London Metal Exchange |
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