Sigma Broking, a notable member of the London Metal Exchange (LME), is reportedly in discussions to sell its brokerage business just three years after joining the exchange. This move comes as the firm faces increased capital requirements and a challenging trading environment.
Key Highlights:
Background:
Sigma became the first new floor-trading member of the LME in 15 years when it joined in 2022.
The LME is recognized as the world’s oldest and largest market for industrial metals.
Reasons for Sale:
Sources indicate that Sigma’s decision to sell may be influenced by significantly higher capital requirements imposed by the LME’s clearing house.
Sigma has reportedly engaged advisers to assist with the sale process.
Scope of Sale:
The entire brokerage business, which includes operations in metals, equities, fixed income, and its units in the U.S. and Dubai, is up for sale.
Six interested parties have emerged, according to one source.
Client Base and Financial Performance:
Sigma’s primary clients are investment funds, but recent trading activity has been described as thin.
The latest accounts show Sigma recorded an after-tax loss of £1.37 million (approximately $1.71 million) for the year ending May 2023.
Future of Ring Trading:
The future of ring trading at the LME has been uncertain, especially after Société Générale exited last year.
Remaining members, except Sigma, expressed their commitment to open-outcry trading, despite the challenges.
The LME has indicated that the floor could close if the number of ring members drops below six or if trading volume in the second ring falls below 75% of the previous year’s level.
Recent Developments:
In December, the British arm of Clear Street joined as a Category 1 member, signaling renewed interest in ring trading.
Clear Street Futures has reportedly hired at least three metals traders from Sigma as it expands its London operations.