.jpg)
The decision on corporate structure follows a very constructive response to the outline proposals contained in the consultation document "The London Metal Exchange Limited: Proposals For Structural Change"(12 June 2000). The proposals are very much in line with those put forward in the paper and are published today.
The chairman of the Exchange, The Lord Bagri CBE, said today "The way is now clear for the Exchange to move forward confidently so that we may positively take the opportunities of the future. The board is confident that agreeing these changes will reinforce our position as the world's premier non-ferrous metals futures and traded options exchange, and give us the chance to develop in other exciting areas."
The proposals set out the way in which the LME would become a shareholder-owned entity, by the creation of LME Holdings which would be the sole member of the LME (for company law purposes) and would itself issue shares to existing members of the Exchange. The intention behind this change is to provide the LME with greater flexibility of operation in the modern business environment. The LME board would be reduced in size and more routine work would be delegated to an executive committee. The LME board would concentrate its work on more strategic issues. The new structure would not be one where it is envisaged that the Exchange would seek to maximise revenues. Rather it would aim to retain its low cost base and rebate excess revenues to its members as now. The holding company structure is designed to enable the existing regulated business to continue to be conducted in the LME, but with the facility for the board of LME Holdings to develop non-regulated businesses and products.
Some refinement to the original proposals has been agreed. The main points of change are as follows:
The board has now recommended that share ownership in LME Holdings should be widened so that the existing associate broker members and associate trade clearing members should be given the opportunity to become shareholders, in addition to ring dealing and associate broker clearing members. Associate broker members and associate trade clearing members who no longer wish to be active trading members will be able to take a cash sum as an alternative to shares in LME Holdings. Associate trade members will also be able to opt for shares as an alternative to the payment of a cash sum in recognition of their position within the Exchange as currently constituted. If an associate trade member decides to take a cash sum rather than shares, that would not preclude the company from continuing as a member of the Exchange.
The board recognises that at this significant time of change the LME should be led by someone who can provide continuity, understands the workings of the LME and enjoys the confidence of the global metals trade and industry, LME members and the regulators. The board has, therefore, asked The Lord Bagri CBE, and he has agreed, to continue to serve as chairman of the LME and LME Holdings until 31 December 2002. Accordingly, during that period the boards of LME and LME Holdings will increase from 13 to 14 (the current board of the LME has 18 directors). This will form part of the proposals to be put to members for approval.
Commenting on the board's recommendations the chairman, The Lord Bagri CBE, today said: "I am pleased that we have had such a constructive and positive reaction to the proposals we put out for consultation. The board has been very open to the view expressed by some of our members that they wish to strengthen the relationship the Exchange has with the global metals trade and industry, associate broker, associate trade clearing, and associate trade members. It was proposed that extending and opening up the shareholding requirements and opportunities would be a way of achieving that. This is a very positive and helpful advance in the proposed form of demutualisation that we are seeking.
"I am also grateful to the board of the Exchange, its members, and others for their confidence in me to help the Exchange through this process of change. I am prepared to serve for two years as the chairman of the newly constituted LME but I believe it is important that the whole membership should be able to vote on the matter.
"The other changes we are putting forward are either consequential upon the decisions on the shareholding proposals or relatively minor and technical. Nonetheless they are all important and I urge all our members to read carefully the full documentation we are issuing today.
Change is not easy in any organisation, but the board believes that well managed change is the right way forward. This Exchange is no stranger to change, indeed, the way it has taken positive, bold decisions in the past is the reason for its world leading position today.
Taking all this together with our work on developing an electronic screen trading capability we have much to do in the months ahead. The board is determined that the LME should take every opportunity offered by the advances in new technology to improve the service it offers. The outcome can only be to the benefit of market users, the LME and its members."
The LME is issuing a full document to members setting out the final recommendations, together with draft Memorandum and Articles of Association for LME Holdings and the revised version of the Articles of Association of the Exchange. The main details are set out in a letter from the chairman of the Exchange which forms the first part of the proposal document. Members will be invited to vote on the proposals, either in person or by proxy, at an Extraordinary General Meeting to be held in second week of September. The Exchange will also conduct business relating to its Annual General Meeting on the same day.
