UK traders told stop dealing with Bear

LONDON (Reuters) - Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, while dealers in New York scaled back their transactions with the ailing investment bank, sources in several dealing rooms said on Friday.

At least six major institutions in London -- including Commerzbank, Royal Bank of Scotland and JPMorgan -- had stopped giving prices to the U.S. bank, a credit trader at one European institution in London, who declined to be identified, told Reuters.

Credit Suisse had also stopped trading with Bear Stearns, a London-based equities broker said.

None of the institutions named by the traders would comment on the subject when contacted by Reuters.

A London-based government bond trader said banks had been withdrawing from transactions with Bear Stearns since Thursday.

In New York, a market source said trading with Bear Stearns was held to very short-term assets, with most transactions very limited in size.

"We were bidding on some agency paper from them early this morning, but we are not doing long-term settlements," said the source, who declined to be identified. "They (Bear Stearns) are still doing business with the street, but the street is shorting (reducing) its exposure to Bear which still has a stock price."

But the London Metal Exchange said that Bear Stearns remains entitled to trade on its electronic trading system Select.

"For as long as Bear Stearns remains a member of the LME and in good standing at the LME's clearing house, LCH. Clearnet, Bear Stearns will remain entitled to trade on LME Select," the LME said in a note circulated to its clearing members.