(Adds copper price in sixth paragraph.)
July 22 (Bloomberg) -- The London Metal Exchange, founded more than a century ago, fined almost all of the dealers buying and selling copper on its open-outcry floor a total of 13,750 pounds ($23,480) and suspended one for standing up during a trading session.
Seven traders were fined 1,250 pounds each for breaking a rule that states dealers must remain seated at all times while dealing on the LME floor, known as the ring, the bourse said in a notice dated July 18. Two traders were each given 2,500-pound fines because it was their second offense in three to six months, according to the notice. There were 11 LME floor-trading companies when the rule was broken July 11.
The LME, which accounts for more than 80 percent of industrial-metals futures trading, operates Europe’s last open- outcry floor. Ten companies including JPMorgan Chase & Co. are now entitled to trade in the ring, where dealers sit on red leather sofas in a circle measuring 6 meters (20 feet) in diameter. On the New York Mercantile Exchange, traders are in a pit with steps that allow them to see above each other.
“The LME operates a ring, not a pit,” Kathy Alys, a spokeswoman for the U.K. exchange, said by e-mail today. “Dealers that stand create an unfair advantage and might obstruct the view of other dealers and LME pricing committee members.”
LME open outcry dates back to the 1800s, when merchants drew a circle in sawdust to trade tin and copper. While traders no longer wear top hats and tails, they still must comply with a formal dress code and rules, including buttoned shirts and a ban on chewing gum. Any breach may bring fines and penalty points, accumulation of which results in temporary suspension.
Copper for delivery in three months on the LME has fallen 4 percent this year amid forecasts for a surplus in global supply and was at $7,066 a metric ton at 1:42 p.m. in Tokyo.
Only Triland Metals Ltd. and Metdist Trading Ltd. avoided fines for failing to remain seated during a copper trading session when the no-standing rule was broken. The seven traders committing first offenses were also given 20 disciplinary points apiece.
The two repeat offenders each received 40 points, and one of them was suspended because he had accumulated 60 points within three months. Trading in the ring may be “unmanageable” and monitoring of trades more difficult when traders stand up, according to Paddy Crabbe, a consultant and author of “Metals Trading Handbook.”
“If somebody bids or offers at a particular price, you can answer them and that’s why in a haste to get the trade done before the bell starts ringing, they may sometimes stand up,” said Crabbe who started as a floor clerk in the mid-1970’s. “But if it becomes too much, it becomes a complete mess. And that’s the reason why people are meant to be trading from their seats.”
Ring dealers must wear suits, ties and dark shoes, according to the LME’s disciplinary code of conduct. The bourse bars use of mobile phones on the floor, as well as eating and drinking. The LME said last month it would keep the ring open beyond 2015.
The LME, acquired by Hong Kong Exchanges & Clearing Ltd. in 2012, was set up in 1877 and is located on Leadenhall Street in London’s financial district, near the Lloyd’s of London insurance market.