London Metal Exchange turns its back on stock market flotation

THE London Metal Exchange yesterday ruled out a stockmarket flotation as it unveiled plans to double trading volumes within five years in an effort to thwart threats from rival futures exchanges.

Martin Abbott, the chief executive, was critical of exchanges that have become public companies saying: "If you go through a flotation as an exchange you lose sight of the reason that an exchange exists. That is to provide services to users. When you float, that comes into conflict with making profits for shareholders."

Mr Abbott, who took over in October, also issued a "hands off" warning to potential predators saying: "We are not for sale."

However, he said he wanted to run the LME on a "more commercial" basis to allow it to fund expansion plans rather than having to call on members for cash each time executives want push through new projects. "We are looking for a more commercial structure in terms of business expansion and growth - members are too busy running their own businesses to run an exchange; they want a professional executive. But we are not looking down the IPO route," he said.

The result of a review could lead to new membership categories and increased fees as the exchange seeks funds for its expansion plans. They include the launch of four new products, including new derivatives contracts for non-ferrous metals, and an expansion into minor metals such as cobalt and molybdenum and some alloys.

Mr Abbott said: "The LME as a business can't afford to stand still. As exchanges succumb to the urge to merge... one has to assume they will be looking for other business sectors to move into. We want to make sure that if there is expansion in metals it comes from the LME, not someone else moving into it."

Mr Abbott said he was confident the LME could fight any challenge. "We are already here and we have experience in the market," he said. He reiterated a commitment to traditional "ring"-based open-outcry trading. While the LME does have a screen based trading system, Mr Abbott said 80 per cent of the more complex contracts were still traded over the ring.