London Metal Exchange

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London Metal Exchange
Formation1877;147 years ago (1877)
PurposeTrading in metals and metals-related contracts
Owner Hong Kong Exchanges and Clearing

The London Metal Exchange (LME) is a futures and forwards exchange in London, United Kingdom with the world's largest market[ citation needed ] in standardised forward contracts, futures contracts and options on base metals. The exchange also offers contracts on ferrous metals and precious metals. [1] The company also allows for cash trading. It offers hedging, worldwide reference pricing, and the option of physical delivery to settle contracts.

Contents

Overview

Ring trading

Trading times are 11:40 to 17:00 GMT.

The LME is the last exchange in Europe where open-outcry trading takes place. [2] The ring was temporarily closed in March 2020 due to the COVID-19 pandemic. [3] In January 2021, LME proposed closing the ring, Europe's last open-outcry trading floor, and moving permanently to an electronic system. [4] [5] However, the ring reopened in September of the same year after resistance from members. [6]

In addition to the 9 companies that have exclusive rights to trade in the ring, around 100 companies are involved in the LME in total.

Precious metals

The LME used, [7] however, to provide trade matching and clearing services to the London bullion market and distributes gold, silver, and gold IRS (interest rate swaps) forward rates on behalf of the LBMA.

Electronic trading

The LME launched an electronic platform called LME Select launched in February 2001. [8] This was developed by a Swedish software house Cinnober. The platform is a FIX-based trading platform, and now handles a majority of the total LME business.

LME Clear

LME Clear is the clearing house for the London Metal Exchange. Launched in 2014 it was designed and built in consultation with the market to provide cost-efficient, EMIR compliant clearing and settlement services, using cutting-edge technology. LME Clear has announced the appointment of David Warren as Chairman effective July 20, 2023. David will succeed Marco Strimer, who will step down as chairman at the end of his term of office. [9] [10]

Lawsuits

In March 2022, LME was sued by Elliott Management, an American hedge fund. The hedge fund sued for $456 million, claiming that LME acted "unreasonably and irrationally" when it canceled nickel trades made on March 8, 2022. [11] Jane Street Global Trading also sued LME for $15.3 million over its cancelled nickel trades in March. [12] Both lawsuits were filed in the High Court of Justice. [13] In November 2023, the court ruled in LME's favor, with Elliott and Jane Street appealing the decision to the Court of Appeals. [14]

See also

Related Research Articles

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<span class="mw-page-title-main">Normal backwardation</span> Situation when futures prices are below the expected spot price at maturity

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In finance, a futures contract is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument. The predetermined price of the contract is known as the forward price or delivery price. The specified time in the future when delivery and payment occur is known as the delivery date. Because it derives its value from the value of the underlying asset, a futures contract is a derivative.

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<span class="mw-page-title-main">Chicago Mercantile Exchange</span> Financial and commodity derivative exchange

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<span class="mw-page-title-main">Open outcry</span> Communication method on the trading floors of stock exchanges

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<span class="mw-page-title-main">Hong Kong Exchanges and Clearing</span> Holding company of the Stock Exchange of Hong Kong Ltd. and Hong Kong Futures Exchange Ltd.

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<span class="mw-page-title-main">Sumitomo copper affair</span> Metal trading scandal in Japan

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<span class="mw-page-title-main">State Reserves Bureau copper scandal</span>

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The London bullion market is a wholesale over-the-counter market for the trading of gold, silver, platinum and palladium. Trading is conducted amongst members of the London Bullion Market Association (LBMA), tightly overseen by the Bank of England. Most of the members are major international banks or bullion dealers and refiners.

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LME Aluminium stands for a group of spot, forward, and futures contracts, trading on the London Metal Exchange (LME), for delivery of primary Aluminium that can be used for price hedging, physical delivery of sales or purchases, investment, and speculation. Producers, semi-fabricators, consumers, recyclers, and merchants can use Aluminium futures contracts to hedge Aluminium price risks and to reference prices. Notable companies that use LME Aluminium contracts to hedge Aluminium prices include General Motors, Boeing, and Alcoa.

LME Copper is a group of spot, forward, and futures contracts, trading on the London Metal Exchange (LME), for delivery of Copper, that can be used for price hedging, physical delivery of sales or purchases, investment, and speculation.

<span class="mw-page-title-main">LME Nickel</span>

LME Nickel stands for a group of spot, forward, and Futures contracts, trading on the London Metal Exchange (LME), for delivery of primary Nickel that can be used for price hedging, physical delivery of sales or purchases, investment, and speculation. Producers, semi-fabricators, consumers, recyclers, and merchants can use Nickel futures contracts to hedge Nickel price risks and to reference prices.

LME Zinc stands for a group of spot, forward, and futures contracts traded on the London Metal Exchange (LME), for delivery of special high-grade Zinc with a 99.995% purity minimum that can be used for price hedging, physical delivery of sales or purchases, investment, and speculation. Producers, semi-fabricators, consumers, recyclers, and merchants can use Zinc futures contracts to hedge Zinc price risks and to reference prices.

References

  1. ↑ "Forward & Futures Contract Specifications". London Metal Exchange. Archived from the original on 4 March 2016. Retrieved 7 August 2015.
  2. ↑ BBC Radio 4 Today , broadcast 25 October 2011.
  3. ↑ Agini, Samuel (17 March 2020). "LME to shut down Ring trading after member tests positive for Covid-19". Financial News . Retrieved 5 March 2021.
  4. ↑ Burton, Mark; Jack, Farchy (19 January 2021). "London's Raucous Trading Ring Calls Time on 144-Year History". Bloomberg News . Retrieved 5 March 2021.
  5. ↑ Desai, Pratima (19 January 2021). "End of an era? London Metal Exchange proposes closure of open-outcry trade". Reuters . Retrieved 5 March 2021.
  6. ↑ Partridge, Joanna (8 June 2021). "'Open outcry' trading to restart at London Metal Exchange". The Guardian. ISSN   0261-3077 . Retrieved 5 June 2024.
  7. ↑ "Archived copy" (PDF). Archived from the original (PDF) on 26 March 2015. Retrieved 31 March 2015.{{cite web}}: CS1 maint: archived copy as title (link)
  8. ↑ "LME Select". London Metal Exchange.
  9. ↑ "Crisis-hit LME's clearing house names former LSE CFO as chair". Reuters.
  10. ↑ "New chairman of LME Clear board". metals-news.com.
  11. ↑ "London Metal Exchange sued for $456m over cancelled trades". the Guardian. 6 June 2022. Retrieved 21 June 2022.
  12. ↑ Smith, Elliot (7 June 2022). "London Metal Exchange hit with two U.S. lawsuits over nickel trading chaos". CNBC. Retrieved 21 June 2022.
  13. ↑ "London Metal Exchange sued for $456m over cancelled nickel trades". BBC News. 6 June 2022. Retrieved 21 June 2022.
  14. ↑ Onstad, Eric (10 July 2024). "Hedge fund Elliott challenges court verdict it lost against LME on nickel". Reuters. Retrieved 16 August 2024.

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