The former chief executive of the London Metal Exchange has joined forces with a technology group to launch a metals trading platform that will compete with the Hong Kong Exchanges and Clearing-owned bourse.
Martin Abbott, who left the LME in 2013 after it was sold for £1.4bn, is working with Autilla on the new venture that will look to exploit customer discontent with the 140- year-old exchange.
“Everybody sees the declining volumes on the LME, and that’s people stepping away from the LME, not doing less business,” said Mike Greenacre, chief executive of Autilla. “There’s definitely something for us there.”
The LME’s decision to raise fees in 2015 dismayed many metals brokers and has led to some people choosing to trade metals through big banks like JPMorgan rather than on the exchange.
New York-listed Intercontinental Exchange has also expressed interest in the new platform, according to a person familiar with the talks. ICE declined to comment and Mr Abbott could not be reached for comment.
New technology has led to a proliferation of commodity trading platforms in China and the rest of the world. Last year Germany-based Metalprodex began an online platform for physical metals trading. Traders such as Mercuria have also experimented with trading oil using blockchain technology, which underpins the digital currency bitcoin.
Ironically, Autilla uses technology from Stockholm-based provider Cinnober, which also helped build the LME’s electronic platform.
Mr Abbott left the LME after it was sold. He is an adviser to the Autilla project, Mr Greenacre said.
Last year the LME was forced to slash fees for one of its most popular trades after a backlash from disgruntled members. Volumes on the exchange fell 8 per cent in 2016, the second year of decline. In January its chief executive abruptly resigned, a month after the chief operating officer left the exchange.
The LME can be more difficult for electronic traders and mainstream fund managers to use compared with other exchanges because of its complicated date structure, which allows for trading on every day out to three months. As a result the large banks such as JPMorgan and Goldman Sachs already run their own trading platforms for LME metals.
Charles Li, chief executive of HKEx, said this week that the LME would look at how to make its electronic trading platform easier to use. He also said a new chief executive could be announced as soon as the first quarter of this year.
Founded in 2013, Autilla is also testing a platform for gold trading in London. That is designed as a trade depository for London’s gold market, which is over-the-counter and not traded on an exchange.
It will start collecting data in the second quarter, which will be vetted “for a period” before it is published later in the year, according to Ruth Crowell, the chief executive of the London Bullion Market Association, the trade body that looks after the market.
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