 |
London Metal Exchange today |
 |
|
|
back
The London Metal Exchange makes a good benchmark for a world pricing on
non-ferrous metals. An index contract -LMEX- based on six primary metals traded
on the exchange was introduced in April 2000. The LME stockholders' equity
equals 20 000 pound sterling and consists of 1 000 common shares at value of 20
pound sterling. The London Metal Exchange is also the biggest world's market for
basic non-ferrous metals. Its annual turnover of US$3,000 billion makes about 10
percent of the whole non-ferrous metal production in the world.
The LME Members are both legal entities and private individuals. They are
divided into four categories:
- dealers, who are entitled to trade “in the Ring” during the “rings”;
- brokers, who deal with futures and options on behalf of their clients;
- traders, who implement deals on their own behalf;
- members, who are not involved in transacting directly.
The London Metal Exchange does not practice a continuous price discovery.
Trading takes place twice a day during special trade sessions (except on
Saturdays, Sundays and Holidays). The sessions are conducted in a big hall,
where four benches in the form of a ring (each for 10 persons) are set to be
used by members of the exchange or their authorized agents. This is “the Ring“
and the trading “ring”-floor, where the participants transact. Transactions
within one trading “ring” are held on several metals alternately.
Each metal is traded for five minutes. Official LME prices are announced upon
the results of the morning session. The afternoon session is held similarly to
the morning one, but its results do not influence official prices.
Most transactions are executed outside the exchange: one hundred brokers are
allowed to sell and buy LME contracts at their own responsibility 24 hours a
day. Those members of the exchange, who have got their representative offices in
other time zones, trade metals when the London Metal Exchange itself is
closed.
Today the LME trades in eight metals: primary aluminium, copper, standard
lead, nickel, tin, zinc and aluminium alloys.
An efficient LME approval system for metals to be allowed for quotation on
the exchange is an important instrument to carry out trading on a stabile and
regular basis. Metals to be traded should comply with the LME bullion standards
of a definite quality, shape and weight.
Specific to the London Metal Exchange is that the LME represents an
industry-based market with a guarantee of a physical goods delivery. Every of
the LME contracts is presumed to be capable of physical delivery, in spite of
the fact that those contracts are called futures. As a result of this physical
aspect, large stocks of material are held in warehouses approved by the LME at
selected locations around the world. The warehouses network allows saving up on
transportation and simplifying physical presence of metals on the world market.
Only two percent of all transactions end up in a physical delivery. The
occurring deliveries mirror exactly demand and supply ratio on a reality market.
Thus, for non-ferrous metals contracts the LME’s daily stock reports play a
major part in the assessment of prices quoted by market makers.
back |
