It may surprise many to realise HKEx’s deal to buy the LME was a China play.

In the early 2000s under the China savvy leadership of Simon Heale, with able advisors like Neil Banks the LME cornered the US Dollar clearing of the Chinese commodities exchanges.  Simon was an early recogniser that China’s rapidly developing economy needed to trade commodities and required enablers so he struck deals in Shanghai. For a long time HKEx’s primary strategy has been to focus on China, when the LME became available they moved.

The 2010s proved Simon Heale right. The LME’s 2021 accounts showed revenues of £205 Million, up 236% on 2011, just under 10% of HKEx’s total. However since buying LME, it has appeared to be more of an afterthought, not reaching its potential. An afterthought no more, thanks to the LME’s multiple Nickel woes, and in December 2022 Bloomberg reported ICE approached the HKEx with a buy in mind.

Is this being seriously considered by HKEx? We do not know, but there is merit in discussing the possibility.


Superman’s Achilles Heel is Kryptonic, Nickel is proving to have the same effect on the LME, first up was the chaos of March 2022 with subsequent quagmire of lawsuits and regulatory investigations. Just recently Jeremy Weir CEO of Trafigura, a leading commodities trader, warned its global nickel benchmark is ‘unfit for purpose’ because it does not reflect the rise of the battery market. That came just days after the LME admitted it discovered bags of stones instead of nickel in one of its warehouses with other traders refusing deliveries.

Without taking a position on the issues, there is no doubt the LME’s reputation has been compromised, and the HKEx must take a long hard look at the LME’s future. Inertia is no longer an option.


The great thing about the LME despite the troubles it has great assets, not close to its potential, so plenty of upsides, and most importantly trades commodities in which demand is currently going one way. Unfortunately its problems could come with liabilities costing in the hundreds of millions with the certain necessity to invest significant management and technology resources.

HKEx will not be a willing seller, but these are powerful incentives. It also limits the universe of interested buyers.

LSEG in some ways is the most logical, LME would fit well into its trading portfolio, especially if given an ESG slant, however, also the most unlikely, potentially falling foul of competition authorities.

CME. According to the Bloomberg report, may be interested but sitting on the sidelines for now. Would definitely attract the competition authorities on both sides of the Atlantic, especially if there are data concerns. However there is a strong business logic.

TMX. Would fit nicely with Trayport, but the costs are likely to be a barrier. Unlikely.

NASDAQ. Not mentioned yet has a strong presence in power (and seafood). Potential, can afford a buy, no obvious competition issues, but is there an interest? Possible.

Deutsche Börse. Definite synergies, especially with commodities clearing, and helps build a London presence. A dark horse but possibly a little too dark given the LME’s troubles.

Euronext. Probably the LME sits outside the Euronext’s comfort zone its core EEA stock markets. Unlikely.

ICE. According to Bloomberg the most interested, fits in with ICE Europe, has the financial firepower, however competition authorities would take a close look. The most likely contender, if indeed HKEx sells.


We don’t think so, and if it does very reluctantly. With an operating profit of £95 Million (46%) and LME’s undoubted potential if HKEx takes a more active interest which at the moment is a must the LME’s current predicaments could prove the catalyst to greater things. In the past Simon Heale demonstrated the possibilities. Other exchanges see it too, will HKEx?

Oh, and then there is the Chinese concept of ‘face’.

Keiren Harris 14 April 2023

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