London Metal Exchange.

Introduction

London has a prominent role in global exchange-traded derivatives trading.

More than 90% of inte
ational business in non-ferrous metal futures is transacted at the London Metals Exchange.

The London Metal Exchange is the largest exchange in the world trading base metal derivative contracts.

Tu
over of LME contracts rose by 11% in 2006 to reach 87m contracts, equivalent to over $8,000bn. Primary aluminum has been the most widely traded metal in recent years. It accounted for 47% of trading in 2006, followed by copper 24% and zinc 15%.

According to some estimates, its trading volume accounts for 95 per cent of the world’s on-exchange metal contracts. These contracts provide a means by which suppliers, processors, stockists and users world-wide can hedge the risks associated with metals trading. They also provide investment opportunities for financial institutions.

The LME offers futures and traded options contracts on six primary metals - aluminium, copper, nickel, tin, lead and zinc and two aluminum alloy contracts - as well as a composite index of these metals. In 2005 the Exchange launched the world’s first futures contracts for plastics, with the introduction of regional plastics contracts in 2007. LME also offers LMEminis, smaller-sized contracts for copper, aluminium and zinc, plus an index contract. The primary functions of the exchange are pricing, hedging and delivery: storage facilities are approved to facilitate delivery of approved brands of the metals traded. As the LME trades contracts for future delivery, it helps discover the future price of metals.

This assists industry in forward planning as the price of metals is volatile.

The London Metal Exchange is innovative while maintaining its traditional strengths and remains close to its core users by ensuring its contracts continue to meet the high expectations of industry. As a result, it is highly successful with a tu
over in excess of US$4,500 billion per annum. It also...

Bibliography

1. DERIVATIVES 2007, IFSL, November 2007

2. 2007 and Beyond, Martin Abbott Chief Executive, LME 8 October 2007QE II Centre, London

3. LME Steel, November 2007 - SBB Steel Markets Asia 2007

4. METALS 2007, The London Metal Exchange Limited, 2008

5. LME Plastics, The London Metal Exchange Limited, 2007

6. The London Metal Exchange, The London Metal Exchange Limited, 2007

7. Non-Ferrous Metal Contracts Futures and traded options, The London Metal Exchange Limited, 2007

8. Information from http://www.lme.com/home.asp