London’s Beleaguered Metals Ring Gets Contrarian Bet on Revival

(Bloomberg) --

Futures dealer Sigma Broking plans to take a seat on the London Metal Exchange’s famous open-outcry trading floor next month, in a bold bet that a slump in volumes won’t spell the end of “the Ring.”

The U.K.-based firm -- which has been planning the move for a number of years -- is likely to be approved as a ring-dealing member within weeks, according to people familiar with the matter who asked not to be named discussing its application.

The move is a contrarian bet at a time of uncertainty for the Ring, whose origins date back to the 19th century, when metals traders drew a circle in the sawdust in a coffeehouse off Cornhill. After closing for 18 months due to Covid-19, trading resumed this month following a campaign by brokers to save the floor. 

But volumes have dropped dramatically, falling 85% from pre-pandemic levels on the first day of reopening. Many long-standing brokers are gloomy about the Ring’s future because of a decision by the LME to reduce its role in setting benchmark prices. 

One broker, Triland Metals, announced its decision to quit the floor in August, saying that “the LME’s new direction of travel” and “the diminished responsibility of the Ring” meant it no longer made sense to have a presence.

Sigma, which is planning to start with a team of 15 people, doesn’t subscribe to the gloomy view of the Ring’s future, according to a person familiar with the matter. The company sees opportunities in managing order flow for hedge fund clients, the person said. Sigma will boost the number of dealers to nine.

Ring Visit

There have been conversations about Sigma potentially joining the Ring for a number of years. But in a sign that the move is now imminent, a team from Sigma was seen on the Ring recently making preparations for the space it would occupy.

Sigma is majority-owned by futures trader Matthew Kent and its chief executive officer is David Mudie, filings with U.K. Companies House show. It was co-founded by Kent in 2008 as an interest-rate futures and options broker, and has since expanded into fixed income, commodities and energy, according to its website.

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