LONDON: Barclays withdrew from floor trading on the London Metal Exchange, the world’s biggest metals bourse, as the bank reviews its businesses to cut costs.
The London-based bank became a Category 2 member of the exchange with immediate effect, meaning it will continue to trade electronically and by telephone, the LME said in a notice to members recently. Barclays remains “deeply committed” to the metals market, it said.
Barclays’ withdrawal leaves 11 companies still in the LME’s 6-metre-wide ring, London’s last venue for open-outcry trading. Natixis SA also stopped floor trading in July to become a Category 2 member, and Jefferies Group joined in September, hiring traders from the French bank. Barclays Chief Executive Officer Antony Jenkins is reviewing which parts of the bank will be sold or shrunk as it seeks to bolster returns.
“They’ve probably decided this function isn’t critical,” said Ian Gordon, a London-based analyst at Investec Plc who recommends buying shares of Barclays. “Is it a continuation of the cost cutting programme? Yes, probably.”
The 135-year-old LME handles more than 80 percent of world trade in industrial-metals futures. Its shareholders, including Barclays, approved a $2.2bn takeover by Hong Kong Exchanges & Clearing in July. The transaction is expected to close by the end of the year, LME CEO Martin Abbott said earlier this month. Barclays will get £32.3m ($51.5m) for its stake, data compiled by Bloomberg show.
The bourse’s trading volume will rise to a record for a second consecutive year in 2012, Abbott said on October 15. The exchange handled 146.6 million contracts valued at $15.4 trillion in copper and other industrial metals last year. Its Category 1 members include JPMorgan Chase & Co, Marex Spectron Group and Sucden Financial Ltd.
“The ring is still an important issue,” said William Adams, an analyst at Fastmarkets.com in London. “The more people there you have the more liquidity you have. If a large player drops out then that has an impact.”
There are now 28 Category 2 members, including Goldman Sachs Group, UBS AG, Standard Chartered Bank, Standard Bank and ICAP. “We recognise that business models change and we are pleased that Barclays Bank remains deeply committed to the LME and the base metals markets,” Abbott said.
Cengiz Belentepe manages the Barclays’ industrial and precious-metals trading. Barclays offers commodity futures and over-the-counter precious metals trading via its BARX FX platform. The bank opened its first precious-metals vault this year and moved into warehousing in 2011. Barclays’ investment banking chief, Rich Ricci, said last month he will combine part of the fixed income and equities operations, his first change since taking sole control in June.
WP-Bloomberg
