(Adds comments, detail)
By Josephine Mason and Susan Thomas
NEW YORK, Aug 20 (Reuters) - Hong Kong Exchanges and
Clearing Ltd (HKEx) has offered the job of London
Metal Exchange chief executive to Martin Pratt, two sources
familiar with the matter said, picking a veteran broker to lead
the bourse through the most tumultuous period in its 136-year
The 42-year-old Pratt, now chief operating office at Triland
Metals Ltd, a non-ferrous metals futures broker owned by Japan's
Mitsubishi Corp, was chosen over the LME's own chief
operating officer, Diarmuid O'Hegarty, and Garry Jones, a former
CEO of NYSE Liffe, the sources said.
In Pratt, the HKEx is tapping an experienced metals trader
who has both knowledge of the LME's complex trading structure
and sufficient distance from the crisis over warehousing that
has engulfed the exchange. Pratt would replace outgoing chief
Martin Abbott, who announced plans to leave in June.
The LME and owner HKEx declined to comment.
Picking a market insider over an exchange industry executive
may reflect the unique challenges ahead for the new CEO,
arguably the most important job in global metals trading.
Pratt has spent his career trading commodities and working
for LME ring dealers, firms that can trade in the exchange's
open-outcry trading floor known as the ring. Before stepping
into the COO job at Triland in January 2007 he worked for
well-known brokers Natixis and Sucden.
Industry sources said Pratt's experience in soft commodities
would help HKEx extend its reach outside of metals, while his
high profile in the industry also worked to his advantage.
"They've got load of exchange experience at HKEx. What they
don't have is metals experience," said one senior industry
source in Singapore.
"Triland represents the traditional trading physical flow.
It's not an investment bank, and he's not tainted by the
warehousing issues," the source said.
"He certainly ticks all the boxes - now it will depend on the
package they offer."
Triland is one of the LME's 11 ring-dealing members, but it
doesn't own any of the warehouses at the center of a controversy
over the rules governing metal storage going back to 2009.
The LME has been damaged by prolonged and scathing criticism
over its handling of its warehousing policy, which some
consumers say has contributed to record high physical price
premiums for aluminum and long wait times to take delivery.
Alongside Goldman Sachs and other banks and traders
that now own many of the world's biggest warehousing companies,
the LME is facing several class action lawsuits alleging
"anticompetitive behavior" in aluminum warehousing.
HKEx has said the suits are without merit and the LME will
contest it vigorously.
It was not clear if Pratt would accept the job.
"Nothing's been confirmed," one of the sources said.
Restoring confidence among industrial users, who say
outgoing CEO Abbott was too slow to tackle the warehousing
issue, will be one of the biggest challenges for his successor.
Abbott has maintained that stockpiles and high physical
prices are due to low interest rates and a market structure
known as contango that make it profitable to sell metal forward
and store it for months or years at a time.
Sweeping changes to rules which will sharply increase the
rate at which metal will be delivered out of warehouses,
announced by the LME last month, will go some way to placating
Beyond warehousing and lawsuits, the new chief will also
need to navigate increased regulation of financial markets and
growing competition from Shanghai Futures Exchange (ShFE) and
CME Group's COMEX copper contract.
Choosing a candidate with a strong background in metals
broking marks a break from the prior two picks for the top LME
Abbott, who netted more than 7 million pounds ($11 million)
from the sale of the LME, was hired as CEO from top trade
magazine Metal Bulletin where he was publisher. His predecessor,
Simon Heale, was a former accountant with Price Waterhouse and a
director at Cathay Pacific Airways.
After paying over $2 billion for the LME in November, HKEx's
Chief Executive Charles Li will be looking for big returns on
the exchange's investment. He said last year the warehousing
debacle almost derailed the takeover.
(Additional reporting by Melanie Burton in SINGAPORE; Editing
by Phil Berlowitz and Tom Hogue)