(MENAFN- Gulf Times) Lower trading volumes and a lack of strategy created a crisis that led to the resignation of London Metal Exchange Chief Executive Garry Jones after three years at the helm of the world's largest and oldest metals market, metal industry sources say.
Parent company Hong Kong Exchanges and Clearing (HKEx) said yesterday that Jones was leaving the LME, but did not give a reason.
The LME declined to comment.
Jones was appointed in August 2013 and his departure follows that of chief operating officer Stuart Sloan late last year.
Problems at the 140-year old exchange helped depress profits at Hong Kong Exchanges & Clearing Ltd (HKEx). It paid $2.2bn for the LME in 2012.
HKEx reports 2016 results on February 27.
Jones, with 30 years experience in exchanges and financial services but limited experience in metals, took over at a difficult time for the LME, which was caught up in a controversy over warehousing metals and its impact on consumers.
He will be replaced in the interim by Matthew Chamberlain, the LME's 34-year-old chief operating officer, until a permanent replacement is found.
Andrew Dodsworth, the LME's head of market operations, has been appointed interim COO.
'The decision to appoint Matt is not a surprise, he's young, intelligent and understands the business, a marketing source at a metals brokerage said.
'(HKEX Chief Executive) Charles Li may decide to keep Matt in the CEO's position if he can find a way to improve volumes...
The problem is finding someone who can reconcile the needs of the physical with the financial market.
An average 31% fee increase at the start of 2015 prompted consumers and producers to abandon the exchange in favour of over-the-counter (OTC) trade, hitting LME volumes.
The downtrend was reinforced last year by economic and demand slowdown in China, the world's top consumer of industrial metals, which subdued prices and activity, triggering an exodus of funds to other markets with higher return potential.
LME volumes overall in 2016 slid 7.7% after a fall of 4.3% in 2015.
However there was a 5.6% drop in copper trading compared with a 26.7% surge in trade on the US rival CME Group's exchange, which sources say is easier and cheaper to use for funds.
'Last year was one of the most difficult for us in recent times, one head of a metals brokerage said.
Incursions into its territory from rivals such as the Shanghai Futures Exchange and CME has seen the LME's share of overall copper trading fall to near 60% from 80% in 2008.
Globally the LME accounts for 71% of all metal traded on exchanges compared with 87% in 2008.
Michael Farmer, founding partner of Red Kite Group, said in a speech during LME Week that the exchange should further cut fees and that the rising costs of trading on the LME would further cut liquidity.
'If they'd had any real success with the new contracts, it wouldn't have hurt so much, a floor trading source said.They hiked the fees and gave us nothing in return.
LME brokers say an iron ore contract should have been launched soon after the takeover, but it was too late now because the Singapore Exchange and the Dalian Commodity Exchange had beaten them to it.
'Instead they gave us aluminium premium contracts, which have never traded, a broker said.
HKEx last week announced plans to launch a US dollar-denominated, cash-settled iron ore futures contract in Hong Kong this year.
The LME's cash-settled steel rebar and scrap contract have gained more interest but has yet to be judged a success.
Part of the problem is the LME trying to break into markets such as gold, dominated by already well-established and liquid futures in Shanghai and New York.
Under Jones the LME also tried to re-launch efforts to boost its activities in freight.
Sources had said the LME was among suitors that were in talks to acquire London's Baltic Exchange, which was sold last year to Singapore's SGX.
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