A Guide to Trading LME. lme.com

Transcription

1 A Guide to Trading LME lme.com

2 More than 80% of on-exchange non-ferrous futures business conducted on our markets

3 The why and how of trading LME A guide for metals investors and traders The LME metals complex is the most liquid in the world with more than 80% of non-ferrous futures and options trading conducted on its markets. The prices discovered on its trading platforms are used throughout industry as a global benchmark price. Furthermore the possibility of settling contracts physically through LME world-wide approved delivery locations ensures those prices remain in line with the physical market. Industrial metals have played a significant part in the story of commodities. Not just seen as a portfolio diversifier or hedge against inflation, base metals have been a key driver of growth in many funds, and in the case of copper, a bellwether for the world economy. Anyone who has a view on metal prices, trades LME. The link with the physical market attracts unparalleled levels of industrial and investment liquidity creating opportunity for all users. LME trading Client of member Category 1 & 2 members* LMEselect (electronic) Ring (open outcry) Telephone market 24 hours LMEsmart matching Clearing by LCH.Clearnet *Only category 1 members can Ring trade Associated fees for 3 month prompt LME Fee: Ring 0.05, Telephone and LMEselect 0.17, LME Data Capture Fee: 0.03, LCH.Clearnet Fee: 0.05 per lot, LME Exchange User Fee: $0.79 per lot. Margin rates set by LCH.Clearnet All platforms are accessible via LME members and all on-exchange member-to-member trades are cleared through LCH.Clearnet. A Guide to Trading LME 1

4 LMEselect connectivity LMEselect LMEselect Slough Abovenet North Abovenet South LMEselect Basildon VPN/internet VPN/internet 10gb circuit 10gb circuit 10gb circuit EQUINIX cross-connect to LME Dual lease lines Dual lease lines INTERXION cross-connect to LME MDS ISV Member Secure high-speed private network Member ISV MDS Market data stream Control for Algo/HFT HUB Primary circuit HUB Secondary circuit Control for Algo/HFT Market data stream ISV connection ISV connection Category 1 & 2 members Market data stream Client of member Market data stream LMEselect is the state-of-the-art electronic platform for the trading of all LME contracts and it offers a range of advanced features sets all tailored to the LME s unique prompt date structure. The platform integrates with member trading platforms via a FIX API either from member sites or via community data centres for the lowest latency trading strategies. An advanced stand-alone GUI is also available for low-volume trading or as a management console. Its unique high-availability architecture ensures real-time data integrity across two data centres and the highest levels of service availability and reliability. Members access the full range of LME trading services from their own information systems via secure high-speed networks. Clients access LMEselect via member systems or member-sponsored ISV platforms. In the case of member systems client traffic must pass through a member order-routing bridge and/or an effective pre-trade risk engine fully controlled by the sponsoring member s compliance team. Alternatively client traffic passes through an ISV pre-trade risk engine endorsed and fully controlled by the sponsoring members compliance team. 2

5 A Guide to Trading LME 3

6 The metals Metal Lot size (tonnes) Contract types Prompt dates Non-ferrous metals LME Aluminium 25mt Traded options TAPOs LMEswaps LMEminis Monthly: 7 out to 123 months (63 for TAPOs and traded options) LME Aluminium Alloy 20mt Traded options TAPOs LMEswaps Monthly: 7 out to 27 months LME Copper 25mt Traded options TAPOs LMEswaps LMEminis Monthly: 7 out to 123 months (63 for TAPOs and traded options) LME Lead 25mt Traded options TAPOs LMEswaps Monthly: 7 out to 63 months LME Nickel 6mt Traded options TAPOs LMEswaps Monthly: 7 out to 63 months LME NASAAC 20mt Traded options TAPOs LMEswaps Monthly: 7 out to 27 months LME Tin 5mt Traded options TAPOs LMEswaps Monthly: 7 out to 15 months LME Zinc 25mt Traded options TAPOs LMEswaps LMEminis Monthly: 7 out to 63 months The contracts There are a number of contract types traded on the LME. Our suite of futures and options are designed to give participants flexibility whether they are transferring or taking on price risk. : Physically settled contracts daily out to 3 months, weekly out to 6 months and monthly up to 123 months Traded options: American-style monthly options up to 63 months TAPOs (Traded Average Price Options): Asian-style monthly average-price options up to 63 months LMEswaps: A contract where the difference between a fixed price and floating Monthly Average Settlement Price (MASP) is financially settled LMEminis: Small-lot (5mt), cash-settled monthly futures for copper, aluminium and zinc out to 12 months 4

7 Metal Lot size (tonnes) Contract types Prompt dates Minor metals LME Cobalt 1mt Monthly: 7 out to 15 months LME Molybdenum 6mt Monthly: 7 out to 15 months Ferrous LME Steel Billet 65mt Monthly: 7 out to 15 months All contracts quoted in US dollars and clearable in US dollars, pound sterling, Euro and Japanese yen (ex LME Steel Billet). All futures contracts (ex LMEswaps and LMEminis) are physically settled but can be closed out prior to settlement with profits and losses paid in cash on settlement date. The prompt date structure reflects physical usage and investors in metal know the price is real. Daily prompt dates Weekly prompt dates Monthly prompts to 12, 15, 27, 63 or 123 months Cash 3 months 6 months LMEminis Tin, molybdenum, cobalt & steel billet Aluminium alloy & NASAAC Lead, nickel & zinc Aluminium & copper Prompt dates for TAPOs, LMEswaps and traded options are: LME Aluminium Monthly out to 63 months, LME Aluminium Alloy Monthly out to 27 months, LME Copper Monthly out to 63 months LME Lead Monthly out to 15 months, LME Nickel Monthly out to 27 months, LME NASAAC Monthly out to 27 months LME Tin Monthly out to 15 months, LME Zinc Monthly out to 27 months A Guide to Trading LME 5

8 The LME in numbers Annual trading: $14.5 trillion notional 3.7 billion tonnes 160 million lots 2.7 million- lot high of futures market open interest Average daily volume and market open interest (MOI) Lots per day Average daily volume Maximum futures MOI 700,000 3,500, ,000 3,000, ,000 2,500, ,000 2,000, ,000 1,500, ,000 1,000, , , LMEselect 3 month average daily volume MOI (lots) LME non-ferrous metals trade up to 40 times world production Lots per day 50,000 40,000 30,000 20,000 Average daily volume-all metals 10,

9 % Distribution of metals traded on the LME () 7% LME Nickel 1% Tin 1% Steel, minor metals, alloys 9% LME Lead 19% LME Zinc 39% LME Aluminium 24% LME Copper A Guide to Trading LME 7

10 Selected metal prices LME Aluminium 3 month price LME Lead 3 month price $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 LME Copper 3 month price LME Nickel 3 month price $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 8

11 LME Tin 3 month price $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 LME Zinc 3 month price $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 A Guide to Trading LME 9

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13 Selected metal prices LME Cobalt 3 month price LME Molybdenum 3 month price $45,000 $40,000 $45,000 $40,000 $35,000 $30,000 $35,000 $30,000 $25,000 $25,000 $20,000 Apr Oct Apr Oct Apr Oct Apr $20,000 Apr Oct Apr Oct Apr Oct Apr LME Steel Billet 3 month price $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 May Sep May Sep May Sep May Sep May Sep A Guide to Trading LME 11

14 Arbitrage opportunities LME Aluminium arbitrage $3,500 SHFE* LME * Excl. VAT $3,000 $2,500 $2,000 $1,500 $1,000 LME Zinc arbitrage $4,500 SHFE* LME * Excl. VAT $4,000 $3,500 $3,000 $2, $2,000 $1,500 $1,000

15 LME Copper arbitrage SHFE* CME LME * Excl. VAT $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000

16 Nothing in this document constitutes an offer or a solicitation of an offer to buy or sell any security or other financial instrument or constitutes any investment advice or recommendation of any security or other financial instrument. To the best of the LME s knowledge and belief, statements made are correct at the time of going to press. All such statements and all opinions expressed herein are published for the general information of readers but are not to be taken as recommendations of any course of action. The LME accepts no liability for the accuracy of any statement or representation. LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Trading Commission (CFTC), or firms who are permitted to solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule The London Metal Exchange,. No portion of this publication may be reproduced without written consent. The London Metal Exchange logo is a registered trademark of The London Metal Exchange. lme.com The London Metal Exchange 56 Leadenhall Street, London EC3A 2DX Tel +44 (0) Fax +44 (0) info@lme.com A member of HKEx Group. V3.0/0413