WHAT IS THE LME?October 28th 2015
The London Metal Exchange (LME) is the world’s largest market in options and futures contracts on base and other metals.
More than 82% of all non-ferrous metal futures business is transacted through the LME, which equates to roughly:
• $14.9 trillion
• 4 billion tonnes
• 177 million lots
The LME provides producers and consumers with a physical market of last resort and, more importantly, the ability to hedge against the risk of rising and falling world metal prices.
The LME is the most liquid and most traded industrial metals market in the world, ensuring prices are consistently reflective of supply and demand. They trade in the following metals:
• Aluminium – 25 tonne lots
• Aluminium Alloy – 20 tonne lots
• NASAAC – 20 tonne lots
• Copper – 25 tonne lots
• Lead – 25 tonne lots
• Nickel – 6 tonne lots
• Tin – 5 tonne lots
• Zinc – 25 tonne lots
• Cobalt – 1 tonne lots
• Molybdenum – 6 tonne lots
• Steel billet – 65 tonne lots
Participants can only trade on the LME through a member firm using one of their three platforms – The Ring, LME select and Inter-office telephone. Trading hours for The Ring, which is pivotal to the functioning of the LME, are from 11.40 to 17.00, running alongside the other 2 platforms. Trading here is done using the open outcry system, the oldest way of trading on the exchange Each LME metal is traded in highly liquid 5-minute sessions, which are representative of global supply and demand and the way official LME prices are established. Official settlement prices are determined by the final offer price before the bell sounds to mark the end of the official ring. The LME is the last exchange in Europe where open outcry trading takes place.
Only a handful of companies, known as Ring Dealing Members can trade on The Ring. Amongst these is Amalgamated Metal Trading Limited, a member of the AMC group and an organization that can trace its origins back to the founding members of the LME. AMT is a leading LME broker and has a diverse client base touching all aspects of the metal industry. A full list of members firms can be obtained on the LME website and in addition to the 10 who can trade in the Ring, around another 100 are involved in the LME in total.