London Metal Exchange
From MarketsWiki
| London Metal Exchange | |
| |
| Founded | 1877 |
|---|---|
| Headquarters | London |
| Key People | Martin Abbott, CEO; Diarmuid O’Hegarty, Deputy Chief Executive of the LME; Alex Morley, General Counsel and Head of Enforcement |
| Products | Futures and options on ferrous and non-ferrous metals and plastic |
| Web site | www.lme.com/ |
Established for over 130 years and located in the heart of London, the London Metal Exchange offers futures and options contracts for aluminium, copper, nickel, tin, zinc and lead plus two regional aluminium alloy contracts.
In 2005, the exchange launched the world’s first futures contracts for plastics; for polypropylene and linear low density polyethylene, with the introduction of regional plastics contracts in 2007. In addition, it offers LMEminis, which are smaller-sized contracts for copper, aluminium and zinc plus an index contract (LMEX).
The exchange contends that it provides a transparent forum for all trading activity and as a result helps to "discover" what the price of material will be months and years ahead. This helps the physical industry to plan forward in a world subject to often severe and rapid price movements.
The LME is a highly liquid market and in 2007 achieved volumes of 93 million lots, equivalent to $9,500 billion annually and between $35 billion to $45 billion on an average business day. Despite its London location, the LME is a global market with an international membership and with more than 95 percent of its business coming from overseas.
Being a principal-to-principal market, the only organizations able to trade are its member firms, of which there are various categories. LME members provide the physical industry with access to the market, to the risk management tools and to the delivery mechanism.
Trading takes place across three trading platforms: through open-outcry trading in The Ring, through an inter-office telephone market and through LME Select, the exchange’s electronic trading platform.
Contents |
Key People
Diarmuid O’Hegarty was appointed deputy chief executive of the LME in October of 2008. O’Hegarty also continues his previous duties of running the regulation and compliance activities of the exchange.[1]
History and Ownership
The LME was founded in 1877 as the London Metals and Mining Company, providing contracts in tin, adding lead and zinc in 1920, aluminium in 1978 and nickel in 1979.[2]
The LMEX Index, its first index product, was started in 2000, and plastics – the first non-metal product – were introduced in May 2005. The move into ferrous metals is scheduled to start with steel contracts in February 2008.
The London Metal Exchange Limited, which owns and operates the exchange, is a wholly-owned subsidiary of LME Holdings Limited. The LME is a demutualized, not-for-profit organization, and exchange representatives have stated there are no plans to change the structure.[3]
LME Holdings has two classes of members. Ordinary share members hold the equity rights, and transfer is restricted to existing and new members. with Class B holders allowed only to trading and clearing rights, though these can be bought and sold. The exchange released new B shares in 2007 to meet demand from brokers and merchants.[4]
Structure and Regulation
The LME operates three side-by-side trading systems. The original open-outcry floor, known as The Ring, operates from 11:45 a.m. to 5 p.m. London time. The LME Select electronic system introduced in February 2001 runs from 1 a.m. to 7 p.m. - extending hours into the Asian trading day in June 2006 - and the exchange also operates 24-hour telephone trading among members.
The exchange operates as a market of "last resort" and provides physical delivery – though used in less than 1 percent of trades – through a network of more than 400 warehouses in 12 countries.
The LME is self-regulatory organization overseen by the UK Financial Services Authority.
Product Development
The LME is evolving from its roots as the world's premier exchange for non-ferrous metals contracts in the wake of a changing customer profile and intensifying competition, notably from the Shanghai Futures Exchange, which vies with its UK rival as the seat of the largest metals complex.
Martin Abbott, the incoming CEO, announced the so-called "2 by 2" strategy in January 2007. This aims to double volumes in three-to-five years through organic growth of non-ferrous contracts and OTC trading.[5]
The exchange announced in June 2007 that it will introduce futures on steel billets; steel is the most actively-traded commodity after oil but efforts to launch steel futures have hitherto faced resistance from the producer community.[6]
The steel contracts will be launched on its electronic and phone system on Feb. 28, 2008, with open outcry scheduled to start on Apr. 28. The contracts cover two regions: Mediterranean and Far East. Both contracts are physically deliverable; the initial delivery points include Turkey, Dubai, Malaysia and South Korea.
The existing complex was expanded with LMEmini contracts, for LME Copper Grade A, LME Primary Aluminium and LME Special High Grade Zinc on Dec. 4, 2006.
Plastics futures were introduced in May 2005, with contracts for polypropylene and linear low density polyethylene.
Aluminium contracts remains the most heavily-traded on the exchange, with volume rising from 36.4 million to 40.2 million in 2007. Copper Grade A ranks second at 21.4 million, followed by zinc, lead, nickel and tin, with options offered alongside the futures contracts.
In November of 2008, the LME upgraded its electronic trading platform LMEselect. The exchange contended that the upgrade would provide a more robust system that offers operational efficiencies. The upgrade came on the back of a record trading month for the exchange. Exchange volumes were up 44 percent in October compared to the corresponding period of 2007 with 11,218,308 lots traded. LMEselect also recorded an increase of 23 percent on its previous record month.[7]
Product Listing
Non-Ferrous Metals
Steel
Plastics
Resources
- London Metal Exchange
For information about the LME's non-ferrous futures contracts as well as plastics and steel billet futures please visit http://www.lme.com.
- LMElive.com
For real time or 30-minute delayed prices and data direct from the LME sign up for a free trial of LMElive at http://www.lmelive.com.[8]
References
- ↑ LME appoints Deputy Chief Executive. Reuters/FXStreet. Retrieved on October 8, 2008.
- ↑ About the LME. London Metals Exchange. Retrieved on December 11, 2007.
- ↑ Press release. LME. Retrieved on February 8, 2008.
- ↑ LME to release new B shares. Financial Times. Retrieved on February 9, 2008.
- ↑ Press Release. LME. Retrieved on February 9, 2008.
- ↑ LME Seeks Profitable Billet with Steel Contracts. Financial Times. Retrieved on February 9, 2008.
- ↑ Press Release. LME. Retrieved on November 10, 2008.
- ↑ Press Release. LME. Retrieved on June 20, 2008.
