The Metal Exchange

Abstract

THE United States produces approximately half of the world's copper output and refines about seventy-five per cent. It consumes, in turn, about half of the refined copper production. Its output of tin is negligible, but it is the world's largest user of the metal, consuming roughly from sixty to sixty-five per cent annually of all mine production. Its dominance as a consumer of the white metal and its prominence as a producer, refiner, exporter, and consumer of the red metal give sufficient evidence of the importance of the United States market. But prior to 1928 the anomalous condition existed whereby the domestic dealer or manufacturer who wished to hedge a purchase or sale of tin was obliged to go overseas for his market. The futures market for tin was in London. Nor was there a market for copper futures. A growing appreciation of the need for a hedging market where so large a proportion of the spot business is done, led to the formation of the National Metal Exchange, which opened for trading December 3, 1928. A futures market in metals was not an innovation in New York. As far back as 1882, two metal exchanges were formed as the outgrowth of meetings in the trade, held early in that year. These organizations-the New York Iron and Metal Exchange, and Iron and Metal, Limited-merged the following year as the New York Metal Exchange. Trading on that market, at first active, declined until the market was nominal. The National Metal Exchange is a lineal descendant of these earlier exchanges, since, at its formation, memberships in the New York Metal Exchange were transferred to the new organization. From a trading standpoint, however, the National Metal Exchange, with modernized rules and machinery, was a revival of a market long dormant. Although in the last decade of the last century the New York market was a leader, and trading was carried on not only in tin and copper but also in lead and zinc, primacy had passed to London or the market had fallen entirely away before the formation of the National Metal Exchange. This exchange opened its doors with a membership of 267, composed of leaders in the world's metal trades and prominent commission houses, who were convinced that a modern and effective futures market in this country was a desirable addition to the facilities available for merchandising the metals which are susceptible of futures trading and of which the United States is so large a user.