The veteran hedge fund trader known as Mr Copper has called on the London Metal Exchange to reduce fees and review its rules on computerised trading or face a further decline in liquidity.

Michael Farmer, founding partner of Red Kite, said moves to court high-frequency traders, who use powerful computers and hardware to place large numbers of orders at ultra fast speeds, could make others wary of using the world’s oldest market for industry metals.

“High-frequency trading appears to have no other purpose than to make money from the trading of other participants by jumping ahead of them,” said Mr Farmer, during his keynote address at the LME Week dinner on Tuesday evening.

“This does appear to me to be an unfair advantage and could be described as front running,” he said.

In an effort to boost trading volumes the LME, owned by Hong Kong Exchange and Clearing, has been trying to attract more electronic and speculative traders. It has also slashed fees after a backlash from its traditional members and mounting competition from rivals such as the CME who are keen to take parts of its business.

“If costs of trading on the exchange are prohibitive, it will drive customers away and the golden goose will die of malnutrition,” said Mr Farmer, who started trading metal in 1963 and has attended more than 50 LME Week dinners.

“Many users will still find the cost of trading to be high and I would strongly recommend the LME to consider further reductions to attract liquidity back,” added Mr Farmer, who is a member of the House of Lords

Red Kite, which runs hedge funds and trades physical metal, has more than $2bn of assets under management and is one of the few metals-focused funds to survive the downturn in commodity markets.

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