The metals industry descends on Hong Kong this week for “LME Week Asia” – the first time since the acquisition of the London Metal Exchange last year that Hong Kong Exchanges & Clearing has hosted the sector en masse on its home turf.
There will be plenty of talk about the usual subjects (the prospect of a change in warehousing rules; the state of the Chinese economy; regulatory reform in Brussels and Washington) but one question above all will pique the curiosity of the assembled executives, traders and brokers: who will be the LME’s next chief executive?
It’s a tricky role to fill. On one hand, it is one of the most important jobs in the metals world – whoever is chief executive has the ability to shape the marketplace where the prices of the world’s most important non-ferrous metals are set.
But despite that, it may be difficult to attract the most senior candidates. The nature of the job has changed since HKEx’s £1.4bn acquisition of the LME: rather than being top dog of one of the world’s top commodity exchanges, the head of the LME will now be a division head within HKEx, reporting to HKEx boss Charles Li.
Martin Abbott, who announced earlier this month that he would step down as chief executive at the end of the year, made the point clearly: “I’m used to being pretty much in charge of everything, and quite reasonably that’s not the case any more.”
One suggestion is that the new head of the LME could come from HKEx’s own ranks. But Mr Li is keen to avoid the impression that he is micromanaging things at the LME. And he will also be conscious of the need to appoint a chief executive deemed suitable by UK regulators.
There are three main sources of potential candidates, according to people familiar with the discussions.
First, the LME could appoint an internal candidate. Of these the most obvious pick is Diarmuid O’Hegarty, LME deputy chief executive, whose deep knowledge of the LME’s structure and regulation is regarded as a major asset.
Second, HKEx could pick someone from the world of exchanges. Possible candidates include Garry Jones, until last year head of NYSE Liffe, and Patrick Birley, who left an executive role at NYSE Euronext last year and previously worked at the LME. Moreover, there is likely to be no shortage of executives looking for a new job after the takeover of NYSE Euronext by ICE– for example, the co-heads of NYSE Liffe, Mark Ibbotson and Finbarr Hutcheson, may be interested in the LME job.
Third, the new chief could come from the LME’s membership. Obvious candidates are the heads of the LME’s 11 ring dealers (although some of them may have higher aspirations – and salaries – than HKEx can offer). Among them, Martin Pratt of Triland Metals and Jim Land of Amalgamated Metal Trading are regarded as the frontrunners.
Of course, HKEx may decide to think outside the box, appointing someone from the metals industry or perhaps an executive from a different industry entirely. (It would not be the first time: Simon Heale, Mr Abbott’s predecessor, had been a senior executive of Cathay Pacific Airways.)
But the current environment calls for a specialist. The new chief executive must be able to dive straight in to delicate discussions with European regulators about new regulations which threaten the way of doing business on the LME. At the same time, the LME’s planned expansion in China would benefit from being spearheaded by a chief executive who knows the metals industry well.
The Commodities Note is a regular online commentary on the industry from the Financial Times
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