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London students witness metals trading in action

Areas of Study , Global , London , Stories Stories from Abroad | Oct 19, 2012 |

by April Sauer (GSB ’14)

The Gabelli School in London group recently visited the London Metal Exchange, one of the largest commodities exchanges in the world and one of the few remaining trading floors that have not turned fully electronic.

Students watched metals traders using a system of phones and hand signals to complete trades. This practice, called “open-outcry,” carries advantages similar to a poker game where players have an obvious “tell.” By watching the activities of buyers and sellers, traders can make guesses about people’s intentions and adjust their strategies accordingly.

All of this chaos serves to set prices for various metals, including aluminum, copper, lead, nickel and zinc. Companies that deal in them depend on the London Metal Exchange to keep trade flowing. Students observed that some metals were more actively traded than others. When the group arrived, the exchange — which works in five-minute trading slots — was trading copper, and traders were frantically using two phones at a time while getting hand signals from other traders on top of that. When that five-minute slot was over, and the metals being traded changed to cobalt and molybdenum, calm took over the trading floor. As soon as those slots ended, the madness ensued once again.

This trip fascinated the class because the students had never seen a trading floor working on the “open-outcry” system. It reinforced some students’ choice of major and perhaps even gave some an idea of a future job.


Photograph of the exterior of the London Metals Exchange courtesy of Dean Ayres on Flickr’s Creative Commons.

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