* Garry Jones to be CEO and join board
* LME deputy chief O'Hegarty resigns
* Jones faces lawsuits, critics of warehousing policy
By Michael Flaherty and Melanie Burton
HONG KONG/SINGAPORE, Aug 27 The Hong Kong Stock
Exchange named industry veteran Garry Jones as the CEO of the
London Metal Exchange, banking on a former top executive at the
NYSE Liffe to help drive its expansion into commodities and
Jones, a 30-year veteran of exchanges and financial services
but with limited experience in metals, inherits a difficult role
at a time when the LME is caught in a controversy over
warehousing metals and its impact on consumers.
In Jones, HKEx has selected an executive with a solid grasp
of soft and agricultural commodities that will help HKEx expand
its franchise beyond metals, HKEx Chief Executive Charles Li
said on a conference call with the media.
His experience across asset classes will enable HKEx to
leverage its commodities business to grow in the much larger
markets of currencies, fixed income and equities as it
capitalises on renminbi internationalisation.
But the new CEO's immediate priority was to manage the LME
and "steady the ship", Li said.
The Hong Kong Exchanges and Clearing Ltd said
Jones will begin on Sept. 30 and will be a member of the LME
board in addition to his role as chief executive. Jones replaces
outgoing CEO Martin Abbott.
Jones said he saw his job initially as "more evolutionary
"I'm not coming in to make significant changes from day
one," he said on the conference call. "It's important that I
listen as much as tell people what to do at the start. There are
a lot of stakeholders in this."
The announcement of an outsider to the metals market caught
many by surprise but underlined Hong Kong Exchange's drive to
move beyond metals, market sources said.
Reuters reported last week that Martin Pratt, chief
operating officer at Triland Metals Ltd, a non-ferrous metals
futures broker owned by Japan's Mitsubishi Corp 8058.T, was
offered the LME CEO role.
Pratt sent an email to staff early on Tuesday informing them
that he had pulled out, two sources familiar with the matter
said. The reason for his decision are not known.
In a regulatory filing, the HKEx said Diarmuid O'Hegarty,
the LME's deputy chief executive who was also in the running,
told the exchange that he will resign after serving a six-month
O'Hegarty, a lawyer who joined the LME in 1998, lobbied for
the LME in Brussels ahead of EU regulations that will come into
force over coming years.
"The loss of Diarmuid is a big blow," a senior industry
source said. "He will be quite hard to replace in the short
term, given his established relationships in regulatory circles
and given all the regulatory issues facing the LME."
MORE CHANGES TO COME
Market participants said they expected further shake-ups
within HKEx, which paid more than $2 billion for the LME last
year in a major deal that allowed Asia's largest exchange by
market value to expand into metals trading.
While the deal was critical to Liz's expansion strategy, a
metals warehousing controversy soon enveloped the world's oldest
The LME has been excoriated for its warehousing policy,
which some consumers say has contributed to record high physical
premiums for aluminum and long wait times to take delivery.
Along with Goldman Sachs and other banks and traders
that 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 them vigorously.
Restoring confidence among industrial users who say Abbott
was too slow to tackle the warehousing issue will be one of the
biggest challenges for his successor.
Abbott says 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.
The LME last month announced proposals to change its rules
that are expected to sharply increase the rate at which metal
will be delivered out of warehouses.