Exclusive-LME floor trader Sigma in talks to sell brokerage, sources say

By Pratima Desai and Eric Onstad

LONDON (Reuters) -Sigma Broking, one of eight members of the London Metal Exchange allowed to trade on the open-outcry floor, is in talks to sell its business three years after joining the LME, three sources with knowledge of the situation said.

Sigma became the first new floor-trading member of the LME in 15 years in 2022 when it joined the exchange, the world's oldest and largest market for industrial metals.

One of the sources said Sigma's reasoning for the move to sell may partly be due to much higher capital requirements imposed by the LME's clearing house and the second source said Sigma had hired advisers for the sale. 

A third source said the whole brokerage business was for sale, including metals, equities, fixed income and its U.S. and Dubai units. Six parties were interested, the source added. 

All three sources declined to be named.

Sigma's main clients are investment funds, but its business has been thin recently, four industry sources said.

According to the most recent accounts filed, Sigma Broking recorded an after-tax loss of 1.37 million pounds ($1.71 million) for the 12 months to end-May 2023.

The future of ring trading had been uncertain at the LME, one of the last venues in the world to still support it, after Societe Generale dropped out last year.

At the time, all the remaining floor trading members except Sigma told Reuters they remained committed to open-outcry trading. Sigma had declined to comment.

The LME has said the floor would close if the number of ring members falls below six, or if their trading volume in the second ring falls to less than 75% of last year's level.

Ring trading at the LME got a renewed vote of confidence in December when the British arm of U.S. broker Clear Street joined as a Category 1, or floor trading, member. 

Sources told Reuters that Clear Street Futures poached at least three metals traders from Sigma as it built up its London operation.

Clear Street Futures, headed by Chris Smith, previously the London-based global CEO at ED&F Man Capital Markets, was acquired in 2022 by Marex, another LME broker.

The LME is owned by Hong Kong Exchanges and Clearing Ltd.

($1 = 0.7997 pounds)

(Reporting by Pratima Desai and Eric Onstad. Additional reporting by Polina Devitt. Editing by Veronica Brown and Mark Potter)