Profile: David King - The struggle to clean base metals

The LME's boss has a hard task in the wake of the Sumitomo scandal.

His office is large and panelled in dark wood, but David King, chief executive of the 121-year old London Metal Exchange, looks sheepish in these sumptuous surroundings. "It purports to symbolise the instit- utional nature of the exchange - its solidity," he says.

It's a wry comment, considering that the "solidity" of the LME - the world's dominant exchange for base metals trading - has repeatedly been called into question over the past 18 months in the wake of the trading scandal where Sumitomo Corp lost $2.6bn (pounds 1.56bn).

The scandal exposed the LME to allegations of lax regulation, which it is still trying to address,and King, 52, is being forced to modernise an institution some say is mired in the past.

In the latest move to demonstrate it is toughening up its policing, the LME said last week it plans to tighten rules requiring members to disclose their trading positions when asked. But that information will go only to the LME, not be publicly disclosed. Some say these changes are too little, too late.

"It is good that progress is being made, but that progress is far too slow," said Wiktor Bielski, base metals analyst at Deutsche Morgan Grenfell. "The LME has actually done quite a shockingly bad job this year in protecting the people who need to use the exchange, such as consumers of metal."

In recent months, wild fluctuations in the zinc and aluminum markets have exacerbated fears that big traders are still using the LME to corner supplies and drive prices up. King intervened in both markets by setting price limits.

"A touch on the tiller has headed off the worst effects of manipulation," said Tarring.

Others are less convinced. Keith Gaunt, managing director of Amalgamated Metal Trading in London, called the system "entirely unsatisfactory". He complained that the LME does not act with "consistency" in deciding to intervene, and that its "always refuses any explanation".

After the Sumitomo debacle, the Securities and Investment Board (since renamed the Financial Services Authority) investigated the exchange and prod- uced a raft of recommendations, mostly addressing transparency in trading, warehouse stock controls and governance.

About three quarters of the suggested changes have been made, including the widely praised publication of more detailed information about metals held in LME licensed warehouses.

King says he is working on the rest. but he faces a difficult balancing act. The exchange is profitable. Its turnover is currently running 20 per cent higher than last year. If he presses for the degree of openness or regulatory oversight that some critics want, he risks losing business. King has to balance the calls for transparency and accountability with commercial viability.

"The more the manipulator becomes ingenious, the more the regulators have to hurry after them," said Tarring. "Whether we will ever get to prescriptive regulation is an open question because it will strike at the strength of the market."

Within the exchange's traditional leadership circles, King draws praise for his cautious, steady leadership.

"He's an efficient administrator, he's a very hard worker and he has systematically and enthusiastically taken up the job," said Christopher Green, chairman of the Metals and Energy Group at Barclays Capital and a former LME chairman.

Despite the reforms, he has been criticised by those who expect him to muster more forcefulness. "Where David falls down is he doesn't have the charisma to front the LME," said Gaunt. "I think his presentation skills are not the best."

This is clearly a man to whom public exposure does not come easily. The Sumitomo scandal and its aftermath has thrown a spotlight unwelcome to a low-key, laconic man who has spent the majority of his career building a reputation as an able administrator with quiet diplomatic skills.

He started professional life as an accountant for US energy and petrochemical companies in far-flung outposts of the Middle East, first in the oil fields of Ahwaz, Iran, then in Al Kobar in the Eastern Province of Saudi Arabia.

Back in the UK, he worked for an engineering firm and simultaneously earned an MBA at Cranfield School of Management.

He then had a three-year position in London that he won't discuss except to say he managed the finances of a wealthy Arab family involved with trading, banking and manufacturing. "I was looking after their activities," he says.

When a headhunter called in 1987 to recruit him as LME's director of finance and administration, he was largely unknown in the City. Furthermore, he says he "knew nothing about base metals".

He once described his career as being "driven by what the next salary level would be [rather] than what the industry has been. At the end of the day, you can satisfy your obligations to your family and your life- style if you have a reasonable income".

He arrived at the LME in 1987, two years after the collapse of the International Tin Agreement, when the exchange was, as he puts it, "on its knees". It was also about the time that the exchange was coming under the regulatory control of the SIB.

Throughout the Sumitomo turmoil, King argued that the LME bears no responsibility for the debacle, since most of the trades were not conducted on the exchange. "We could hardly expect the entire planet to report to us," he said.

Some experts feel the LME would be better served by a CEO with more leeway to promote new policies. In fact, one of the SIB's chief recommendations was that the post be strengthened.

"I would like to see him getting more power, and more qualified staff," said Norbert Brodersen, chairman of KM Europa Metal in Osnabrueck, Europe's largest copper consumer.

He also charges that despite the recent addition of new members, the LME board is still dominated by industry insiders.

"There is a natural conflict of interest," Brodersen said. "If you see who has the voting power, it still belongs to the board members who are involved in the industry."

Still, there is widespread acknowledgment that King faces an uphill battle.

"He's employed by his members, so he has to persuade - he can't tell them what to do," said Christopher Gilbert, Professor of Economics at Queen Mary and Westfield College at the University of London.

"The members are not always aware of how odd the exchange appears to the rest of the world."

Copyright: IOS & Bloomberg

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Relations Officer

£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable