Our HSG London Alumni team has been looking into
day-to-day trading at the London Metal Exchange. Diana Buraka (second left) met
one of our HSG Alumni board members, Marko Kusigerski (first left), who works
at the LME and shares his experiences at the oldest open-outcry Metal Exchange.
We got a unique insight into the essential
processes at the London Metal Exchange from a privileged insider tour by one of
our Alumni members.
For all those new to this subject, London
Metal Exchange is the largest market in the world in metal options and futures,
and it is central to official price setting. It is also, the only remaining
‘old fashioned’ exchange that still practices the ‘open-outcry’ way of trading.
Each metal listed on the LME is traded individually in a short five-minute ring
trading session and its outcome determines the official price worldwide! In
2012 LME was sold to Hong Exchange for £1.4 billion and currently it is looking
into further expansion in China.
To our great fascination, we observed life
trading sessions for zinc, copper and aluminum. The tactics of the ring trading
resembled a heated parliamentary debate between the MPs, where ten exclusive
members of ring were shouting out their last moment bid, accompanied by some
energetic coded gestures that would outdo any fierce debate of two
gesticulating Italians. The highlight of the short five-minute trading session for
aluminum was at the very last minute, since every member hopes to get the last
bid advantage. The whole process looks quite archaic and it hasn’t changed for
the last hundred years. The ring proclaims the rule of gentleman, which means, styling
yourself to something more extravagant than a conservative dark suit and tie
will result in a hefty fine. During the ring session traders aren’t permitted
to access any digital devises like phones or even digital watches, so, the only
arsenal they have to their means is pen and paper, which brings me to memories
of my final exam at the university of St. Gallen. Don’t get me wrong, not all of them are
Swiss, but most of them are wearing Swiss watch, that they tune every morning
to the perfect clock hanging above the trading ring. This obsession with the
time-precision is beyond my time-management comprehension, but for the traders
it is second nature, since every second can result into a ‘rugs to riches’
story. Pursuing a career of a trader and becoming familiar with the secret
coded gestures and verbal messages is something that one starts from
infanthood. Sadly, I missed my chance…
Eventually the bell marked the end of the
official morning session and the heated activity in the ring diffused in a
matter of seconds. We caught ourselves still holding our breath for the last
five-minutes following the intensity of the trading battle. When the spectacular show was over, we made a
group photo with relatively relaxed faces. It was time to thank Marko for an
insightful tour at the LME and return to our offices.
