LONDON It is "more than
necessary" for the London Metal Exchange to establish
warehouses in China, the worlds largest metals trading
venue, JPMorgan Chase & Co. executive director of global
commodities Christian Schirmeister told AMM sister
publication Metal Bulletin.
JPMorgan, the largest
shareholder in the LME, will collect £150.4 million ($240
million) from the sale of the exchange to Hong Kong Exchanges
& Clearing Ltd. (HKEx). The deal is expected to close by
year-end. Collectively, JPMorgan and the two next-largest
shareholdersGoldman Sachs Group Inc. and Metdist
Ltd.would have been able to block the deal if they
werent happy with the terms.
The takeover could help the LME
achieve its long-term goal of establishing warehouses inside
China and attract new metals business to the exchange,
"Establishing warehouses in
China is something the LME has worked on for some while, before
a possible sale of the exchange was even considered. They have
spoken with port authorities, local representatives, members of
various parts of governments, but so far no solution has been
found," he said.
"We hope that, with the help of
its new owners, the LME can accelerate that process.
Considering that China accounts for 42 percent of the world
metal demand, its more than necessary for the
worlds leading metal exchange to have warehouses there,"
Schirmeister sees the
construction of a proprietary clearing house as one of the most
significant aspects of the LMEs growth pipeline.
"Once (the exchanges own
clearing house) is up and running, there should be more
interest from users to become clearing house members," he said,
declining to suggest a timetable for the establishment of
warehouses in China.
More than a year after the
collapse of MF Global Holdings Ltd., many of its clients have
yet to receive final payouts on assets held with the
Bringing clearing in-house might
help promote confidence in the market by extending the kind of
counterparty protection enjoyed by clients of LME members,
according to Schirmeister.
"We think its the right
approach to have a clearing house that attracts not only
Category I, II and III members, and a few others, but their
customers as well," he said.