Britannia Global Markets to give up LME membership on June 20

By Pratima Desai

LONDON (Reuters) – Britannia Global Markets will give up Category 2 membership of the London Metal Exchange (LME) from June 20 after the recent nickel debacle which led the exchange to suspend trading and cancel all nickel trades on March 8.

Disorderly trade on that Tuesday saw nickel prices double in a few hours to a record above $100,000 a tonne on expectations China’s Tsingshan Holding Group and others would have to buy back their short positions.

Britannia’s departure highlights the problems the world’s largest and oldest metals exchange faces in convincing the metals industry that it can run an orderly market, broking sources said.

Britannia Global Markets, part of London-based Britannia Financial Group, will completely give up membership of the LME.

“The current market uncertainty following the well-publicised recent events, coupled with a clear hesitancy of some participants to support the existing LME market structure has led to a change in our strategic approach, without any loss of commitment by us, to the metals trading business,” said Mark Bruce, chief executive of Britannia Financial Group.

The LME declined to comment.

The broker said in a release on Thursday that it plans to focus on over-the-counter contracts — bi-lateral agreements between brokers or banks and their clients trading.

Category 2 brokers are also members of the exchange’s clearing house LME Clear. They can trade for their own account and on behalf of clients.

“You would only need Category 2 if you wanted to offer clearing, which is now a very different business to what it was pre-Russia because of the volatility and much higher margin requirements,” a broking source said.

Russia’s invasion of Ukraine has boosted volatility in prices of nickel and aluminium because of fears that supplies from Russia would be disrupted. Russia accounts for about 10% of global nickel output and 6% of aluminium production.

Apart from transaction and clearing fees for LME trades, Category 2 members also pay other fees such as a subscription fee of $90,000 membership of the exchange and $25,000 a year for a general clearing membership.

(Reporting by Pratima Desai; Editing by Edmund Blair and David Evans)