NEW YORK The London Metal Exchange should look to hire a new chief executive officer who is in tune with the views of market users and who understands the constantly evolving nature of the industrys interests, according to outgoing chief executive officer Martin Abbott.
Abbott, whose departure by year-end was announced June 6 (amm.com, June 6), told AMM that his decision to leave the LME was a gradual one but its six-month timeframe recognizes the LMEs need to find a suitable replacement.
"Its important that whoever is running the exchange spends time with users and gets to understand why people use this place, but its also important that they never rely too much on one or two peoples views and opinions at any given time because its a market," he said. "One of the fascinating things about a market is the ebb and flow of vested interestsits what makes it interesting, and you have to understand where they are coming from."
Abbott, who has been the exchanges chief executive officer since 2006 (amm.com, Aug. 2, 2006), steered the exchange from being a not-for-profit organization run by its shareholders, the members, to the commercially modeled enterprise owned by Hong Kong Exchanges & Clearing Ltd. (HKEx) as it is today (amm.com, Dec. 6).
"Its been 10 months since the shareholder vote (on the LME sale), so seven months since regulatory approval; the integration has gone well and I wasnt just going to say goodbye and be out of the building tomorrowtheres another six months to go now still," he said. "So I was looking at things and thinking, things are going really well, and if Im going to be in a position to move on at the end of the year we need to make that public now. We need to be clear about it. The timing is based around 2014 rather than today."
Abbott said he had always made it clear he would stay at the LME until he felt the transition and integration into HKEx was completed.
Along with the new owner has come a business model completely different to that which Abbott had inherited; and with it, less entrepreneurial freedom.
"I had the luxury of taking over a business that was smallish and in which I had considerable latitude; I think its fair to say that bureaucracy was not actually a watchword at the LME, and so I had a huge amount of freedom," he told AMM. "I hope I used that freedom to build up a nice strong business, but now that it is part of a much bigger group it would be quite unreasonable to expect it to have the same kind of freedom and the same kind of attitudeit just cant happen."
The sale of the LME to HKEx was an endorsement for the growth of the exchange over the past several years, with the overwhelming vote in favor of the deal a positive reflection of the LMEs relationship with its shareholders, Abbott said.
Investment in technology was a key part of that growth, Abbott said.
"The first 18 to 24 months (of my time at the LME) was actually survival (for the exchange). We couldnt keep Select (the LMEs electronic platform) openit was just a mess. The members didnt really have a lot of faith in the exchange, which is unfortunate because the exchange had a really good lot of people working for it. They had heavily underinvested," he said.
But the sixth version of Select was a turning point, Abbott noted, with its success giving the LME the ability to roll out further technological changes that pushed the exchange firmly into the 21st Century.
"Weve also been able to keep turnover growing, and thats been related to a lot of our investments because it was inconceivable back in 2006 that the LME would ever be receiving flows from algorithmic traders and hedge funds," he added.
Abbott added that his personal low point was last year's death of Michael Warren, LMEs former head of technology, "who was a key partner in the exchanges journey" (amm.com, May 16).
The thorny issue of warehousing is age-old and unlikely to vanish, although opinions on it are constantly changing, Abbott said.
"I gave my first-ever speech on warehousing to an audience complaining about the dysfunctional LME in 1990 at a zinc conference. Warehousing is the touch point where all parties come togetherthe physical, the forward, the future, the financier, the bank, everyone comes together on warehousing especially in these current circumstances (of low interest rates and contango markets)," he said.
"So dealing with warehousing is just something that the person who runs the LME has to deal with. It isnt going away," he told AMM.
Abbott doesnt yet have a new role in mind. "It didnt seem feasible or appropriate to go looking for a job until Id actually announced that it was on my mind," he said, but noted that he would like to find something that allows him to recapture the entrepreneurial spirit of his early days as the LMEs chief executive officer.
"What the LME now needs is someone who can manage it in the context of its HKEx ownership; and what I need is to go back to finding something where I can maybe be a little more buccaneering and possibly where theres more scope to make a difference," he said.
"Id like to be in a business where theres scope for some growth, maybe a turnaroundeither something in its early stages or something thats lost its way a bit," he added.