London Metal Exchange

The London Metal Exchange (LME) is the futures exchange with the world's largest market in options and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates of up to three months from trade date, weekly contracts to six months, and monthly contracts up to 123 months,[2] it also allows for cash trading. It offers hedging, worldwide reference pricing, and the option of physical delivery to settle contracts. In July 2012, LME's shareholders voted to sell the exchange to Hong Kong Exchanges and Clearing for £1.4 billion.

The London Metal Market and Exchange Company was founded in 1877, but the market traces its origins back to 1571 and the opening of the Royal Exchange, London. Before the exchange was created, business was conducted by traders in London coffee houses using a makeshift ring drawn in chalk on the floor.[3]

At first only copper was traded. Lead and zinc were soon added but only gained official trading status in 1920. The exchange was closed during World War II and did not re-open until 1954.[4] The range of metals traded was extended to include aluminium (1978), nickel (1979), tin (1989), aluminium alloy (1992), steel (2008), and minor metals cobalt and molybdenum (2010). The exchange ceased trading plastics in 2011. The total value of the trade is around $US 11.6 trillion annually.[5]

Many deals are made for commodities to be delivered in three months' time. The custom stems from the time that copper cargoes originally took in 1877 on their voyage from the ports of Chile.[3]

Commodities traded[edit]
The LME offers futures and options contracts for aluminium, aluminium alloy, NASAAC (North American Special Aluminium Alloy), cobalt, copper, lead, molybdenum, nickel, steel billet, steel rebar, steel scrap, tin[6] and zinc.

Facilities[edit]

Main entrance to the former premises of the LME, at 56 Leadenhall Street in the City of London
To trade contracts in copper, tin, or any other metal listed on the LME, one has to trade through an LME member. Purchasers of contracts, which are then left to reach maturity, will receive a warrant for a specific LME approved warehouse to take delivery of the metal if required.

The LME issues, each day, detailed figures on how many tonnes of each metal is in its warehouses, which helps producers and consumers make correct business decisions.