Coming in the wake of the $2bn (pounds 1.3bn) Sumitomo copper trading scandal, the review is likely to result in a reduction of the influence of the metal trading directors on the LME board.
The SIB said that its review of how the LME is run would be conducted in parallel with its enquiry into what users want from the exchange. The SIB expects to send up to 3,000 questionnaires to metal traders and producers worldwide to find out how they view the exchange.
David King, chief executive of the LME, said: "We would expect to work with the SIB to produce governance proposals. We welcome the review."
Although four of the exchange's 16 directors are outsiders, the board is dominated by trade members. This is consistent with the principle of practitioner self-regulation enshrined in the Financial Services Act.
But during the copper scandal earlier this year there were so many conflicts of interest that the board had to delegate the handling of the crisis to a specially appointed sub-committee consisting of two directors, Mr King and Kit Farrow, former deputy governor of the Bank of England, plus Peter Mason, a judge, who was brought in from outside.
Mr King said: "Self-regulation is a good principle, but the resulting conflicts of interest which can arise can create difficulties."
Changing the board will not be popular with many LME members and users. Previous proposals to increase the power of independent directors were rejected by members.