(News Bulletin 247) – The London Metal Exchange announced Friday that the bank would leave the famous “ring” on Tuesday. A symbolic decision.

Once the rule, the open outcry market (when operators place orders orally) has obviously become rarer with the growing development of electronic trading.

There is one exception, however, in the form of the “ring,” an open-outcry trading room at the London Metal Exchange (LME), the world’s largest metals exchange. The “ring” is so-called because brokers place orders from a circle of red sofas.

This “ring” will soon be a little less full. According to a notice published Friday by the LME, the bank Société Générale will no longer be, as of Tuesday August 27, a “category 1” member of the LME but a “category 2” member.

>> Access our exclusive graphic analyses, and enter the Trading Portfolio’s confidence

A departure without impact but…

This decision is purely symbolic because category 2 members have the same rights as category 1. Except that they no longer have access to the “ring”, and thus to the open outcry market. They can therefore continue to place electronic orders.

According to sources close to the matter cited by Bloomberg, Societe Generale’s decision will not have an impact on its workforce or its services related to metals markets.

Not a Copernican revolution, then. Especially since, according to the Financial Times, the volumes managed by the French bank represented only 6% of the total. But the announcement “raises questions about the future of the ring”, judges Reuters, while Société Générale was the last European bank present in the ring. The British agency notes that with the departure of Société Générale, the ring will have only seven members compared to 30 at the end of the 80s.

Reuters recalls that in 2021, the LME decided that the “ring” could be closed, under certain conditions, including if the number of “category 1” members falls to less than six or if its members’ volumes represent less than 75% of their historical level. In its notice published on Friday, the LME specified on Friday that none of these conditions have been met following Societe Generale’s announcement. The ring is therefore still standing.

For how long? Bloomberg points out in any case that the presence of the “ring” has been the subject of debate for several years, due to its somewhat anachronistic nature in a world dominated by electronic trading. According to the Financial Times, the LME had considered closing it in 2021 before changing its mind following a consultation.

“Because we are still ring brokers, it allows us to set prices,” Marc Bailey, chief executive of Sucden Financial, a member of the association, told the British daily. “The legitimacy of the floor really lies with physical customers, who want to have a price they can rely on and that is not disrupted by electronic exchanges and algorithms,” he added.