LONDON (Reuters) - A former chief executive of the London Metal Exchange is holding talks with trading houses and brokers about launching a new London-based metals trading platform in a challenge to the LME amid discontent over rising fees.

Former LME Chief Executive Martin Abbott attends the 7th World Copper Conference in Santiago. REUTERS/Victor Ruiz Caballero

They hope to do a feasibility study within a few weeks that would assess the practicalities and costs of an alternative base metals trading platform, Martin Abbott told Reuters on Monday.

“There are a number of different options which are mentioned, some people talk about an OTC (over the counter) platform, others talk about a (full-blown) exchange and it’s really very early days,” he said.

The LME, the world’s biggest and oldest metals market place, which has traditionally been a first port of call for metal consumers and producers, has suffered from falling trading volumes, struggling new contracts and controversy over backlogs at warehouses.

The LME is also being challenged by the CME Group and the Shanghai Futures Exchange, which have expanded their range of metals futures contracts and storage networks.

Abbott resigned as CEO of the LME at the end of 2013, a year after Hong Kong Exchanges & Clearing Ltd bought the 139-year old LME for $2.2 billion. He is currently an independent non-executive director of Mitsui & Co. Commodity Risk Management, which is part of Japanese trading house Mitsui & Co.

Abbott said talks among brokers had started several months ago. “There is a sense maybe the traditional trade business takes the back seat in the way the exchanges are planning their futures,” he said, referring to the discontent among users over fees and other issues.

The LME declined to comment.

“Traders are very willing to listen as they feel they have been abused by the system,” said Malcolm Freeman, a director at UK broker Kingdom Futures, which uses the LME. He declined to say whether he was involved in the project.

Attempts to challenge the LME’s supremacy in the metals business were also seen at the turn of the century, when electronic trading contracts started.

In 2000, London-based metals and energy broker Spectron Futures Ltd launched an online platform to trade LME base metals options, which preceded the exchange’s own electronic system Select by one year.

Spectron, not a member of the LME itself, initially had the support of around seven LME ring dealing members. It steadily grew, but lost momentum within a few years because it had limited access and was unavailable to data vendors, market participants said.

“If you are trying to offer a different platform by trading someone else’s product, you are probably not going to get very far but if you offer a completely new platform with your own contracts, then you may have a lot more chances,” Freeman said.