[HONG KONG] Commodities broker Marex Spectron is expanding its metals business into new regions and products beyond the London Metal Exchange after fee hikes led its customers to look for cheaper avenues for trading.
London-based Marex has hired new staff to reach into Japan and to add an industrial metals base in Singapore, its global head of metals told Reuters in an interview late last week.
Simon Van Den Born said the additions would boost its regional base metals business now centred in Hong Kong and help build up alternative business lines such as in gold.
"I would say that the predominant response we get from clients is: how can I avoid the LME with its fee structure? People are migrating away from the LME because of that," Mr Van Den Born said.
Hong Kong Exchanges and Clearing Ltd bought the LME for US$2.2 billion four years ago, before raising trading fees by an average 31 per cent at the start of last year as it aimed to wring profit from its investment.
LME volumes fell in 2015 and have dropped by 9 per cent in the first quarter, a trend the Hong Kong bourse has blamed on slow market conditions. Volumes at rivals the US Comex bourse and Shanghai Futures Exchange have grown.
The LME was not immediately available for comment.
Said Mr Van Den Born: "Our business a couple of years ago was centred around the LME floor and 20 people in London. Today the business is just far more diverse. Precious metals is something we've seen decent growth in the last 24 months."
"We're looking to institutional investors, Chinese players like hedge funds, that's the marketplace we're expanding in ... Our China corporate business may have subsided a little bit, (but) our investor business has increased - our presence in Singapore will maintain that."
While its overall metals business was steady, Marex's direct Chinese volumes have shrunk 30 per cent since the start of 2015, he said.
Marex Spectron was formed through a merger of metals and oil brokerage firms in 2011 and is majority owned by British private equity investor JRJ Group.
Its head count has doubled to more than 500 since 2012, of which metals accounts for some 60 global roles. Beyond London, the broker has bases in Houston, Oslo and New York.
Mr Van Den Born also said that HKEX's push to develop a monthly contract at the expense of the LME's current structure which encourages daily trade for three months out, was changing the nature of the bourse.
"After a while you defund the contract, you just drive towards a cash settled contract rather than a fundamentally physically settled contract which has been the bedrock of the LME."