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Jim Armitage: London Metal Exchange’s members shot themselves in the foot

Jim Armitage: Garry Jones has resigned as the chief executive of the London Metal Exchange: Reuters
Jim Armitage: Garry Jones has resigned as the chief executive of the London Metal Exchange: Reuters

One day last summer, security guards at the London Metal Exchange’s swanky new Finsbury Square offices thought they were coming under fire. Loud bangs like gunshots resounded around the building.

Thankfully, it wasn’t a terror attack but the sound of structural steel pins cracking in the upper floors. Trading was evacuated from the financial capital of the world to Chelmsford.

Chief executive Garry Jones pointed out how lucky it was the incident happened during the summer months when trading volumes were low.

Trouble is, it’s not just July and August that have seen low trading volumes in this last outpost of open-outcry holler-and-wave trading in London. Even as the market has picked up, volumes have been low. And for traders, the reason’s simple: since the Hong Kong Exchange bought it for $2.2 billion four years ago, the price of access to the market has gone up too much. In these quarters, Jones’s departure today will not be mourned.

But their criticisms tell only half the story. When the LME was mutually owned by its members, it was the cheapest place to trade anywhere. Those trader-members who agreed to take the money from the highest bidder must have known it would want to make a return on its investment. And given that their fees are the main source of revenue, they must have expected prices to go up.

Under pressure to make profits for Hong Kong and keep access charges low for customers, Jones was in an impossible position. He tried some compromises but the complaints continued getting louder, doubtless a prime reason for his sudden departure today.

But whoever his successor is, the Hong Kong Exchange will still want to get its money’s worth.

If members were worried about prices, they shouldn’t have sold in the first place.

Industrious approach

Theresa May’s industrial strategy is a welcome change both from the laissez-faire yea rs of George Osborne and the business-bashing that marked the PM’s first months in charge.

Key industries must work hand in hand with the state to make sure they’re getting the support from state functions like education, transport and tax that they need.

Two points that mustn’t get lost in the hubbub: while Britain languishes at the bottom of the world league tables for fast-internet fibre optic to homes and businesses, forward-looking companies will struggle to thrive.

And as long as schools fail to make coding a key part of the curriculum, we’ll never keep up with competition from Asia and the US. Much work to do.