LME Chief Abbott Plans to Leave After $2.2 Billion Takeover
London Metal Exchange Chief Executive Officer Martin Abbott will depart at the end of the year after the sale of the world’s biggest industrial-metals bourse to Hong Kong Exchanges & Clearing Ltd. for $2.2 billion.
A successor will be announced “in due course,” the LME said in a statement yesterday. Abbott, 53, also resigned as Hong Kong Exchanges & Clearing’s co-head of global markets. Shares of the Hong Kong bourse fell for a fifth day, declining by 0.9 percent to HK$126.40.
Abbott became CEO in 2006, overseeing a period of expansion that drove annual turnover to $14.5 trillion from $4.5 trillion in the year before he took over. The 136-year-old exchange, which counts Goldman Sachs Group Inc. and JPMorgan Chase & Co. among its members, now handles more than 80 percent of global trading in industrial-metals futures. He won 99 percent shareholder backing to sell the bourse to Hong Kong Exchanges last year.
“The exchange significantly developed during his tenure,” said Jim Coupland, global co-head of commodities at Standard Bank Group Ltd. and a former LME board member. “The sale price is one measure of the success of the exchange over recent years. I will remember him as a real asset who demonstrated real industry knowledge and a passion for the business. He will be missed.”
The LME, founded above a hat shop in London’s financial district, had operated independently since it started trading tin and copper in 1877. It later added aluminum, nickel, lead, zinc, cobalt and steel. The exchange monitors a global network of more than 700 warehouses and plans to run its own clearing house from next year.
It operates London’s last open outcry trading floor, a 6-meter-wide (20-foot) trading pit that handled about 20 percent of transactions in 2010. Its origins are in the Jerusalem Coffee House in the financial district where metals traders would meet in the early 19th century.
“It’s a good time for me to go out and start again somewhere else,” Abbott said in a phone interview from London. “If you’ve been effectively running the show and then you sell the show to a much bigger company, it’s not going to be the same any more. There are plenty of people here with the experience and talent necessary to run the LME.”
Abbott said he will seek another executive position, while he hasn’t thought about the next step yet nor had time to go job-hunting. He declined to comment on who may succeed him at the LME.
Abbott opened the LME’s first overseas office in Singapore in 2010 and sought to expand the exchange’s business through new products, including mini-contracts in copper, zinc and aluminum in Singapore. Hong Kong Exchanges beat rival bids from CME Group Inc., Intercontinental Exchange Inc. and NYSE Euronext.
Not all of his innovations worked. The LME withdrew its plastics contracts in April 2011 because of a lack of trading and merged the Far East and Mediterranean steel contracts in 2010.
While the exchange’s volumes and revenues gained, LME users have complained about long waits in warehouses monitored by the bourse, which are helping drive premiums for metals from aluminum to copper higher. The LME tried to address the complaints by increasing load-out rates and introducing special delivery requirements. Warehousing is a “perennial issue” for the LME and had nothing to do with his resignation, Abbott said.
“From the day that he joined the LME he was a passionate and extremely competent CEO,” said London-based Michael Overlander, the CEO of Sucden Financial Ltd. and a former LME board member. “This warehousing situation was not of his doing, it just happened to occur on his watch. He’ll be remembered more for what he managed to achieve for the LME than for other matters.”
Abbott’s career took him from running a pub when he finished a law degree at Leicester University in central England to a decade-long stay in Connecticut that ended with him becoming president of AMM LLC, a publisher of information on the metals industry. Jobs as a student included working at an opencast coal pit near the northern English city of Leeds.
A three-month stint as a security guard in 1982 took him to Leadenhall Street, where the LME would move to 12 years later. It wasn’t until 1984 that he had his first sight of the trading ring, on his first day as a reporter at Metal Bulletin, a news and data service which he joined from Drapers Record, a fashion magazine where he worked as an advertising salesman and then a reporter.
The LME will become even more dominant in metals in five years, Abbott said. The bourse will move to its own clearing platform on Sept. 22, 2014, after 25 years with LCH.Clearnet Group Ltd., it said this week. Own clearing will take the bourse into a “new chapter” and Hong Kong’s proximity to mainland China “will pay dividends,” Abbott said.
“When I joined the LME Select system used to fall over three times a week and everyone thought the LME was a bit of a backwater and not really a major league player,” Abbott said. “And I’m really proud that we stabilized the systems and we got ourselves to a position that people understood that we were shoulder to shoulder with other market places.”
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