The London Metal Exchange
Established for over 130 years and located in the heart of The City of London, the London Metal Exchange is the world’s premier non-ferrous metals market. It 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 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. Such is the liquidity at the exchange that the prices ‘discovered’ at the LME are recognised and relied upon by industry throughout the world.
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.