Jefferies Group Inc. (JEF), the investment bank that bought Prudential Bache’s commodities business, is seeking the right to trade on the floor of the London Metal Exchange, said a person with direct knowledge of the matter.
Jefferies is preparing an application for a Category 1 membership at the 135-year-old bourse, the world’s largest metals exchange, said the person, who asked not to be identified because the move hasn’t been made public. As a Category 2 member, the New York-based company is limited to trading electronically and by telephone.
Jefferies, run by Chief Executive Officer Richard Handler, added more than than 400 employees through its purchase of the Bache unit, which was completed in July 2011 and operates in New York, Chicago, London, Hong Kong and Hamburg. The move bolstered Jefferies’s clearing and execution broker services in commodity derivatives, foreign exchange, base and precious metals, Handler said last year.
If approved by the LME, Jefferies will join 12 companies, including JPMorgan Chase & Co. and Barclays Plc (BARC), that transact on the exchange’s floor. The firms deal in the so-called ring, London’s last open-outcry trading floor, which allows brokers to handle larger volumes and appeals to some customers, said Robin Bhar, an analyst at Societe Generale SA in London.
“A lot of orders still go to the floor,” Bhar said today in a telephone interview. “It’s not as important as it was 10 years ago, but I think at least half of the day’s volume probably goes through the floor.”
Chris Evans, a spokesman for the LME, declined to comment on Jefferies’s status.
The LME handled trades in aluminum, copper, tin, nickel, zinc, lead, steel billet, cobalt and molybdenum valued at $15.4 trillion last year, according to its website. The exchange’s Category 2 members include Credit Suisse Group AG (CSGN), Citigroup Inc. (C), Deutsche Bank AG (DBK) and Goldman Sachs Group Inc. (GS), according to the website.
Hong Kong Exchanges & Clearing Ltd., the world’s fifth- largest equity market, agreed on June 15 to pay 1.39 billion pounds ($2.2 billion) for the LME. The Asian exchange pledged to keep the London bourse’s ring and system of establishing metals prices until at least 2015.
The International Petroleum Exchange and the London International Financial Futures & Options Exchange have already shut trading floors.
Michael Frawley, former global head of metals at Newedge USA LLC, left the firm to join Jefferies, a person familiar with the matter said earlier this month. Frawley, who worked for more than two decades at Newedge, is a former board member of the LME. Newedge is also a Category 1 member.
Brian Friedman, chairman of Jefferies’s executive committee, said this month the company is taking advantage of the “global opportunity” to expand its commodities and metals businesses.