The recent article in the FT regarding a potential change in benchmark cobalt pricing, made me think back to a conversation I had with a MF Global broker back in the late 90’s. The broker relayed the story to me of a conversation he had with a very large fund manager, whereby the manager called to inquire about the “tick size” in the Lead Futures contract. After relaying this information to the manager, said manager promptly sold short the equivalent of 10% of the world’s current lead production. The article in the FT, which discusses a potential shift in cobalt benchmark pricing from a MB based price system to a LME based price, made me think of this story because we feel it is a inherent mistake to simply assume that exchange pricing is always superior to physical transactional pricing. ETF activity, cash and carry trades, as well as the explosion in HFT has left exchange pricing often divorced from the real underlying market fundamentals. While we do agree that a benchmark price based on a loose canvassing of market participants is fraught with problems, we feel that an exchange price involving the aforementioned exchange driven activity is just as problematic. Given today’s technology, it would seem that market participants could devise some kind of pricing system which utilizes anonymous input pricing backed up with some verifiable volume metric.