The London Metal Exchange is losing a Category 2 member in a week, as Britannia Global Markets plans to exit on 20 June, citing a change in trading strategy.
The Britannia Financial Group subsidiary trades primarily in nickel, which doubled to $100,000 per metric ton in only a few hours last week. The drastic move was made on the assumption that Tsingshan Holding Group and other nickel traders would soon buy back their shorted positions on the commodity.
Mark Bruce, chief executive of Britannia Financial Group, told Reuters that the firm chose to go in a different direction for its metals-trading business.
“The current market uncertainty following the well-publicised recent events, coupled with a clear hesitancy of some participants to support the existing LME market structure has led to a change in our strategic approach, without any loss of commitment by us, to the metals trading business.”
Britannia Global Markets trades in aluminium, aluminium alloy, copper, lead, nickel, steel, tin, and zinc.
BGM went on to say that it will shift its focus to over-the-counter contracts between brokers or banks and clients.
Members of the LME at Category 2 are also members of LME Clear and may trade for themselves and for their clients. BGM says it is no longer participating in that, either.
According to an anonymous broker who spoke with Reuters, the metals trading scene has changed radically in the past few months due to Russia’s invasion of Ukraine.
“You would only need Category 2 if you wanted to offer clearing, which is now a very different business to what it was pre-Russia because of the volatility and much higher margin requirements.”
Currently, Russia supplies about 6 percent of the global aluminium production and a tenth of the global nickel production. Russia’s invasion of Ukraine has turned both of those markets on their heads due to concerns that supplies may be embargoed and because of the supply-chain disruption caused due to the military action.