Sir, Perhaps lost in the dazzling excitement of the potential sale of the London Metal Exchange (“Goldman Sachs to become biggest winner in sale of LME” – FT, report, 03/10/11), is the concept of good stewardship. The Victorians knew a thing or two about this and a mutual structure, abandoned 11 years ago, was the mechanism that ensured the smooth running of this free market.
Today, the referee is up for sale at a time in the LME’s history when a good umpire has never been more in demand.
For intractable problems requiring independence of judgment and “good refereeing”, users of the market need look no further than the conflict of interest at the heart of today’s LME, whereby a Category 1 ring-dealer, JP Morgan, may own a large number of the LME-approved warehouses. Today 64 per cent of all warehouse space is owned by a trader or bank which, while required to store metal neutrally, nevertheless has an interest in the outcome of price.
For those of us who recall how the LME was a beacon for the free-market trade in base metals during the Cold War, we fear greatly for what will be lost. In the LMEs preoccupation with its own sale, its stewardship of a fair and free market has suffered, and the worrying suggestion is that the referee, not content with being a mere umpire, wants to score the goals.
Lipmann Walton & Co Ltd,
Walton-on-Thames, Surrey, UK
Chairman, Minor Metals Trade Association 2003-2006
Published by Financial Times