London Metal Exchange members are pushing the exchange to backtrack on a new trading fee that would boost its revenues and entice potential bidders for the 130-year-old exchange but would hurt some brokers' way of doing business.
The LME, which has traditionally kept fees low for its member-owners, announced last month that it would introduce an exchange user fee.
The LME has clearly done this to boost revenues ahead of any potential sale, a senior LME trader said. People are angry.
Industry sources say members were not consulted on the levy, and some are rallying their peers to try and persuade the LME board to head off the move, which comes into effect in March.
It's a step change in the way the LME is looking at its business model, and it's surprising that they haven't consulted about this more widely, said a trading company executive.
There is a lot of discussion going on behind the scenes amongst the members, because it's clear that there is concern about the impact. I'd be very surprised if there wasn't some kind of change. It's going to be a hot January for the LME.
The LME said in September that at least 10 parties had expressed interest in buying it, and analysts estimate it could be worth as much as 1 billion pounds.
Analysts say any buyer would probably change the LME's business model, which has constrained profits to help keep members' costs down.
LME members are already concerned that a new owner could hike fees at a time when their margins are being squeezed by a economic slowdown and a move to more electronic trade.
The LME's new exchange user fee amounts to 50 pence per lot per side for each purchase or sale contract for a client.
For a segregated three-month trade, for example, the new levy would mean an increase to 85 pence per trade from 51 pence now, LME head of business development Chris Evans said.
Fee increases are a matter for the board and are discussed every year, Evans said. The board's decision to raise fees in 2012 and the reason for the move were communicated to members in December, and the fee increase will become effective in March.
The LME gave no further comment.
The new charges will be particularly hard on firms operating on a high volume, low-cost model, industry source say.
The LME is going to make a lot more money out of this, said one senior LME trader.
The people in the market who will really be hit by this are the high-frequency traders, who obviously do huge volumes. Because they do so many lots, they will obviously see a cost increase.
Banks, who also do large-volume trades, will also feel the pinch.
Nobody likes an increase in costs, and I would think that I would put myself in the camp that is disappointed that this is the route that the exchange is going down, said an executive at a top LME member said.
I think that some people have expressed their disapproval of the process, and I gather that some of the banks have voiced their frustration about this because it's a meaningful number.
JP Morgan, the LME's top shareholder, and Goldman Sachs, the second-largest, declined to comment. Barclays also declined to comment.
There is already growing opposition to a possible sale. Industry sources have said top bank stakeholders are likely to amass enough support to block a sale they fear will bring a more heavily regulated owner and hurt their lucrative warehousing businesses.
The banks could find support to block a sale among those members whose business models will be impacted by an increase in fees.
The question I would be asking is what happens if the exchange is not sold? Is there a necessity for an increase in fees? the executive at the LME member said.
(Additional reporting by Maytaal Angel, editing by Jane Baird)