Wells Fargo & Co. (WFC), the U.S. lender that’s building its investment-banking unit, is considering applying for membership to the London Metal Exchange so it can clear more trades for clients, according to two people with direct knowledge of the plans.
The bank is seeking to become a Category 2 member of the exchange, said one of the people, who asked for anonymity because Wells Fargo hasn’t applied yet. The San Francisco-based firm probably won’t seek a Category 1 membership, which would allow it to trade on the floor of the world’s biggest industrial-metals market, the person said.
Wells Fargo has joined at least one exchange this year and may become members of others so it can clear securities or derivatives traded on those marketplaces. In January, the CME Group added Wells Fargo as a member so the bank could handle futures and options clearing. Adding London would allow the firm to take orders for the purchase or sale of contracts linked to metals from copper to aluminum.
Elise Wilkinson, a company spokeswoman, said the bank had no comment and declined to make executives available for an interview. George Simonetti, who is leading expansion of the clearing business, said in a June 4 statement that “clients will continue to need access to clearing venues globally.” He reports to markets division co-heads Walter Dolhare and Tim Mullins.
Wells Fargo would join at least 31 other LME members listed as Category 2, entitled to trade electronically and by telephone. They can also issue LME contracts and are members of LCH.Clearnet Ltd., the LME’s clearinghouse, according to the exchange. Citigroup Inc., Barclays Plc and Bank of America Corp. also have units listed as Category 2 members.
The firms are restricted from trading on the floor of the exchange, known as the ring, which is reserved for Category 1 members such as JPMorgan Chase & Co. (JPM)
About 5 percent of transactions take place in the ring, excluding phone trades that are based on ring prices, while electronic trading accounts for as much as 40 percent of LME volume and phone orders have a share of as much as 50 percent, according to the exchange.
The LME, founded in 1877, accounts for more than 80 percent of global metal-futures trading and operates London’s last open-outcry trading floor.
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