Industry veteran Garry Jones is London Metal Exchange CEO
The Hong Kong Stock Exchange named industry veteran Garry Jones as the CEO of the London Metal Exchange, ending a high-profile recruitment process by selecting a former top executive at the NYSE Liffe.
Jones, with 30 years of experience in the exchanges and financial services industry, inherits a difficult role at a time when the LME is caught in a controversy over warehousing metals and its impact on consumers.
The Hong Kong Exchanges and Clearing (HKEx), as the exchange is formally known, said Jones will begin on Sept. 30 and will be a member of the LME board in addition to his role as chief executive.
In a regulatory filing, the HKEx said Diarmuid O'Hegarty, LME's deputy chief executive, told the exchange that he will resign from his duties after serving a six-month notice period.
(Read more: Goldman, LME face aluminum storage lawsuit)
Several top industry executives were said to be in contention for the LME role. Reuters reported last week that Martin Pratt, chief operating officer at
Triland Metals, a non-ferrous metals futures broker owned by Japan's Mitsubishi, was offered the LME CEO role.
It was not clear following the HKEx announcement on Tuesday what happened to Pratt's candidacy. Reuters said O'Hegarty was also among those in the running for the CEO job, along with Jones.
The announcement of a candidate seen as an outsider caught many in the metals market by surprise.
"You'd expect that someone with good knowledge of the LME would have gotten that job," said one senior industry source in Singapore. "The exchange has now changed hands and with a lot of people leaving, it would have been good if knowledge about the people and the products had been retained in a new chief executive," he added.
The HKEx, led by former J.P. Morgan banker Charles Li, paid more than $2 billion for the LME last year, in a major deal for the Hong Kong bourse that allowed the Asia's largest exchange by market value to expand into metals trading.
While the deal was critical to Li's expansion strategy, a metals warehousing controversy soon enveloped the world's oldest metals exchange.
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 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 outgoing CEO Martin 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.
The LME announced last month changes to its rules that are expected to sharply increase the rate at which metal will be delivered out of warehouses.
Beyond warehousing and lawsuits, the new chief will also need to navigate increased regulation of financial markets and growing competition from Shanghai
Futures Exchange and CME Group's COMEX copper contract.
Abbott, who netted more than 7 million pounds ($10.92 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.