One of Britain's last great independent financial markets has agreed to sell itself to China.

The 137-year-old London Metal Exchange has agreed a £1.4bn takeover from Hong Kong Exchanges and Clearing (HKEx) after a nine-month auction process which saw bids from InterContinental Exchange, CME Group and NYSE Nasdaq.

The deal will mean massive windfalls for the LME's largest shareholders, JP Morgan, Goldman Sachs and Metdist, the metal brokerage owned by the LME's former chairman Raj Bagri's family.

The deal will pull together the LME which accounts for 80 per cent of the world's base-metal options and futures contracts with China, which accounts for 42 per cent of the world's metal consumption.

HKEx will retain the LME as the brand for the market and it will be run out and regulated in London. They will also preserve the LME's unique, open outcry system, known as the Ring.

The LME is the last exchange in Europe to use open outcry. This involves five-minute trading sessions in each of the nine metals twice a day. Traders stand around a trading pit buying and selling through a mixture of shouting and hand gestures.

Unlike other exchanges, the LME acts as the market of last resort and for this reason runs warehouses to hold stocks around the world.

Contrary to popular belief, the LME deals only in base metals with gold, silver and other precious metals traded on the over-the-counter London Bullion Market.

Ownership of LME shares is restricted to its 94 trading members.