The introduction of electronic trading did not, despite dire warnings, destroy the LME’s business: it simply made it better. That must be the key test for the value of future developments of the electronic trading environment.
It is hard to think of anybody who got hurt by the growth of the electronic trading platform LME Select.
Members had the opportunity to reduce their costs in the increasingly competitive three-months market and focus on the difficult parts of the business (some did); clients got greater transparency and ease of trading in the outrights, and the LME benefited from a rapid growth in turnover that was driven in large part by the addition of what are known as “professional traders” (which begs the question: who are the amateurs?).
But it didn’t look that way at the start.
When the trading system was first introduced it was a member-to-member system that looked more...