The London Metal Exchange has received two new membership applications, including one from the first potential Chinese member, in a vote of confidence as the exchange prepares for a sale.
BOCI, the international arm of the Bank of China, one of the country’s leading banks, and London based GH Financials have applied to become broking and clearing members of the 135-year-old exchange, which hosts futures contracts used as global industry benchmarks for metals from copper to nickel.
The Chinese bank’s move comes as the Asian nation has become the largest buyer of many raw materials and industrial metals traded at the LME.
Arthur Fan, chief executive of BOCI Global Commodities in the UK, said: “Over 50 per cent of the volume of the LME is for Chinese customers but there is no Chinese investment bank to provide hedge services directly to them.” He said the investment bank was also in the process of entering iron ore swaps trading in Singapore.
The Chinese bank’s LME application also comes as European banks – the traditional players in commodities derivatives trading – are cutting back or shutting their commodities operations as they face increasing balance sheet constraints.
While the LME is set to decide on the applications at a board meeting next month, the addition of the Chinese bank to its membership will increase the exchange’s attractiveness as a takeover target.
The LME, one of the only a few member-owned exchanges in the world, is waiting for the second round of offers by a May 7 deadline. The exchange’s suitors include the CME Group, ICE and NYSE Euronext. The exchange is home to Europe’s last trading pit where traders shout orders to each other, and is seen as one of the few prizes left in an increasingly consolidated industry.
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