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
"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
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
"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
"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.