Marex Steers Growth Away From LME Following Fee Hikes

The commodities broker is looking to boost its base metals business in response to increased LME trading fees.

Marex Spectron, a global commodities broker, is looking to expand its metals business into new regions and products outside the London Metal Exchange (LME) after fee hikes have led its customers to seek more cost-effective avenues for trading.  

Finance Magnates last reported on Marex Spectron in May, when the company announced it was looking to capture new business from banks in response to them scaling back their commodities operations.

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Marex is reported to have hired new staff to reach into Japan and to add an industrial metals base in Singapore, according to Simon Van Den Born, its global head of metals. He said the additions would boost its regional base metals business now centred in Hong Kong and help build up alternative business lines including gold.

Increased LME Trading Fees

He added: “I would say that the predominant response we get from clients is how can I avoid the LME with its fee structure? People are migrating away from the LME because of that.”

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LME was bought by Hong Kong Exchanges and Clearing four years ago for $2.2 billion. Last year, it raised trading fees by an average of 31 percent as it sought to maximise the profit from its investment.

LME volumes declined in 2015 and have fallen 9 percent in the first quarter. In a statement, the exchange said that “volumes fluctuate for reasons including macroeconomic factors. Historically low prices have led to lower hedging activity from the physical industry, which is a significant constituency of the LME market.”

Marex Spectron was formed in 2011 through a merger of metals and oil brokerage firms. The business has since become more diverse, while precious metals have experienced decent growth during the last 2 years.

Van Den Born also said that HKEX’s push to develop a monthly contract at the expense of the LME’s current structure which encourages daily trade for three months out, was changing the nature of the bourse.

He concluded: “After a while you defund the contract, you just drive towards a cash settled contract rather than a fundamentally physically settled contract which has been the bedrock of the LME.”

LME’s increased trading fees may also have been a factor in former LME chief executive Martin Abbott’s decision to set up a rival trading platform as reported last week.

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