LONDON: The world’s biggest metal market, the London Metal Exchange (LME) which accounts for 80 per cent of traded volume in global metal futures transactions, saw record trading volumes last year of 120 million lots equivalent to $11.6 trillion and 2.8 billion tonnes of metal. Pre-tax profit in 2010, limited by the low fees, fell 28 per cent to 12.5 million pounds.
CME Group, the largest futures exchange in the United States, has in recent months appeared to distance itself from a takeover, and a spokesman said on Friday it did not comment on rumours. But the sources said that CME has approached the LME before, and that it is a likely contender this time.
“Well CME is the obvious one. If you can’t beat ‘em, buy ‘em. It has got to be someone with a significantly large enough wallet to do the job,” the head of an LME member company said.
ICE declined to comment, and the SGX said it does not comment on market rumours. Two metals trading sources said a firm bid was unlikely to come from an Asian exchange.
“It doesn’t take a genius to figure out who it’s going to be,” the shareholder said. “But is there a firm bid on the table? Not that I’ve seen as yet. It’s very early days.” UBS said CME already had an existing metals business, while ICE had limited exposure to metals but had demonstrated its willingness to diversify its offerings. The LME board is due to gather on Friday for a previously scheduled meeting. “The members...they’ll all have to be convinced. But with the situation at the minute and some companies short of cash — to sell those A shares at a premium in this environment, that’s got to be attractive,” the head of the LME member company said.
LME has thrown open its doors to a potential 1 billion pound ($1.5 billion) takeover and is considering a sale that might end the independence its chief executive previously said was not negotiable.
LME said on Friday it was considering a sale after receiving “several expressions of interest”. A source with knowledge of the situation said there had been a firm offer, which had triggered the beauty parade.
LME members speculated that likely suitors might include CME Group Inc, the largest futures exchange in the United States, and IntercontinentalExchange.
“Potentially it could be CME or ICE. There’s also Singapore (Singapore Exchange) or the recently launched Hong Kong Mercantile Exchange, both of them have the money. There’s also Eurex owned by Deutsche Boerse, the head of a metals brokerage said.