LME’s Choice of HKEx for Better Presence in Asia and Protection of Traditional Trade System

London Metal Exchange (LME) announced on June 15 they judged the acquiring offer by Hong Kong Exchange & Clearing (HKEx) is the best choice for LME. The offer price is 1.388 billion pound. LME seems to have selected HKEx as its new stakeholder due to regionally increasing demand for nonferrous metals in Asia and vigilance against the stakeholder’s control on LME’s traditional trading systems.

LME has received acquiring offers from several major commodity exchanges including IntercontinentalExchange (ICE) of the USA, Chicago Mercantile Exchange (CME) of the USA and European major exchange. Japanese major trading houses and other concerned sources recognize LME finally chose Asian exchange, HKEx, to raise its presence in Asian market where nonferrous metal consumption is stably increasing.

In China, Shanghai Futures Exchange (SHFE) has increased the presence. Double price problem is sometimes pointed out between LME and SHFE when the copper price gap sometimes exceeded US$ 500 per tonne in recent years.

Japanese major think tank source also analyzes LME seems to have been very vigilant to maintain its traditional trading systems. The source suggests CME or ICE would require LME to computerize or integrate the trading systems. In the case, LME might be unable to continue its unique and traditional ring trading or warehousing function. LME can maintain these systems along with HKEx’s offer.

However, Japanese major trading house person says HKEx might issue and sell LME new stocks in order to recover the acquiring cost. CME, ICE or other related institutions would be possible to purchase the newly issued stocks and the new shareholder may offer LME computerization and trading system integration.