Guide to the

London Metal
Exchange
SETTING THE GLOBAL STANDARD
Contents

2

The London Metal Exchange

4 Price risk management

6
Price discovery

8 Warehousing, branding and price convergence

10 The contracts and the metals

12 Contract specifications
15 Trading at the LME

16 Clearing

at LME Clear

17

Other services
Contacts
The London Metal Exchange
Setting the global standard
The London Metal Exchange (LME) is the
world centre for the trading of industrial metals.
The majority of non-ferrous, on-exchange trading
is conducted on our markets, with a growing
presence in ferrous and precious metals.

The LME brings together participants from the physical

industry and the financial community to create a vital,
robust and regulated market where there is always a buyer
or seller, where there is always a price and where there is
always the opportunity to transfer or take on risk –
24 hours a day.

Investors value the LME as a vibrant futures exchange

with close links to industry where they can take on risk
based on prices that are truly reflective of global supply
and demand. The possibility of physical delivery via the
worldwide network of LME-approved warehouses makes
this the perfect hedging venue for industry, and the world
gains reference prices they trust.

The Exchange provides producers and consumers of metal

not only with a physical market of last resort but also,
perhaps most importantly of all, with the ability to protect
against the risk of rising and falling global metal prices.

After the successful introduction of our ferrous contracts

and precious metals, we continue to work with the metals
community to launch new products which best serve their
price-risk management needs. In 2019, these included
cash-settled products across the aluminium supply chain,
hot-rolled coil futures and new products to service the
electric vehicle battery industry.

The LME continues to provide the global market

with an increasing range of price risk management
and trading tools.

2 GUIDE TO THE LME

 Annual trading

$13.5 3.9
trillion billion tonnes

176 2.2
million lots million lots of
open interest

GUIDE TO THE LME 3

4 GUIDE TO THE LME
Price-risk management
The perfect hedge
The LME is a meeting place of buyers and sellers
of metal futures and options. We provide producers
and consumers of metal around the world with the
best way to manage their exposure to the risk created
by metal price volatility.

Producers (those who sell the metal they mine and refine)
are at risk of prices falling, and consumers (those who buy
and make things from metal) are at risk of prices rising.

Hedging against these price movements using LME

futures and options enables the metal industry to focus
on their core business.

Benefits of hedging:
• protect against adverse price movements
• lock in margins and offer long-term
fixed prices to customers
• improve budget forecasts
• turn inventory into cash or security for finance
• protect physical inventory against price falls
• hedge physical purchases in times of
production difficulty.

GUIDE TO THE LME 5

Price discovery
The world’s price formation venue
The LME is the de facto price formation venue for non-ferrous
metals. The prices “discovered” on our platforms are used as the
global reference and basis for physical trading as well as in the
valuation of portfolios, in commodity indices and metal ETFs.

Our prices are trusted because the LME is the most liquid
and most traded industrial metals market in the world.
Our global network of warehouses ensures these prices
are truly reflective of supply and demand.

Real-time bid and offer prices are available 24 hours a

day via our market data service LMElive and also from
approved data vendors. The LME also aggregates and
publishes a set of reference prices that are based on
highly liquid periods of the trading day.

The LME is also home to the LBMA Platinum

and Palladium Prices, which are discovered in a
twice-daily auction. This pricing solution is delivered
via LMEbullion, our custom-built electronic platform.

6 GUIDE TO THE LME

 LME reference prices
What are they How are they used? Prompt dates When are Currency
and how are they established?
they calculated?

LME Official Price and Official Settlement Price

The LME Official Price is the The LME Official Price Cash, 3 month and 12.30 – 13.25** USD (we also publish
last bid and offer quoted is used as the global 3–forward December exchange rates for EUR,
during the second open- reference for physical prices* (which roll annually) GBP, JPY)
out cry (or Ring) session contracts and the LME
and the LME Official Official Settlement Price is
Settlement Price is the last the price at which all LME
cash offer price futures are settled

LME Unofficial Price

The LME Unofficial Price The LME Unofficial Price Cash, 3 month and 15.00 – 15.40 USD
is the last bid and offer is a good indicator of 3–forward December (ex minors)
quoted during the third afternoon trading and is prices* (which roll annually)
Ring used as a reference price

LME Closing Price (or Valuation)

The LME Closing Price Used by LME Clear All prompt dates Provisional Closing Prices
(also known as the Evening and LME members for from 16.15
Evaluation) is determined calculating margins
by the LME Quotations Closing Price 17.50 USD
Committee after the close
of trading on the Ring Closing Price 18.15 JPY, GBP, EUR

LME Asian Reference Price

The LME Asian Reference The LME Asian Reference 3 month 07.01 – 07.03 USD
Price is calculated on Price provides traders with LME Aluminium, (08.01 – 08.03 BST)
the volume-weighted a useful early-day guide LME Copper and
average price (VWAP) to trading in one of the LME Zinc
of trades transacted on most significant and liquid
our electronic trading periods of the day
platform, LMEselect,
between 06.55–07.00 or
07.55–08.00 during British
Summer Time (BST)

LMEprecious Reference Price

The LMEprecious reference Used by the precious Spot for LME Gold 10.30 – 10.32 USD
prices provide intra-day metals market to manage and LME Silver 12.00 – 12.02
LME Gold and LME Silver price risk throughout the 15.00 – 15.02
spot price points and are trading day
calculated three times
a day

* 15 month official and closing prices published for tin and minor metals. 15 month unofficial price also available for tin.
** All times are Greenwich Mean Time (GMT) unless otherwise stated.

GUIDE TO THE LME 7

Warehousing, branding
and price convergence
The physical market of last resort
Our market complements the physical. The possibility of physical
delivery – supported by over 550 international storage facilities
and almost 500 LME listed brands – results in price convergence
ensuring our prices remain in line with the physical industry.
The combination of price convergence, the global reach of the LME’s
storage facilities and listed metal brands, the fact that physical deals are
negotiated using LME prices and unparalleled levels of liquidity means
the world gains a price it trusts.

In times of extreme shortage or over supply the LME also provides

producers and consumers with a physical market of last resort.
LME warehouse companies must meet strict criteria before they
are approved and are typically located in high-consumption areas
or logistical trading hubs for the shipment of material.

All metals stored in LME-approved storage facilities on warrant

are LME-approved brands from LME-approved producers ensuring
conformance to the Exchange’s strict rules on commodity grade,
quality and shape.

The LME is also committed to the introduction of responsible sourcing

requirements to its brand lists. We have been working with a variety of
industry bodies and the producers of our listed brands regarding the
responsible sourcing of materials for several years.

The LME occupies a unique position in the global metals industry.

Our brand lists determine which brands of metal can be delivered
against LME contracts; and more broadly, many global physical supply
contracts stipulate LME brands for delivery. As such, the LME fulfils
a broader role across much of the metals industry in identifying the
brands which reflect the needs of the market. We are therefore able
to work with our industry to ensure that our brand lists embody global
expectations of best practice.
Updates to our policy can be found at lme.com/responsiblesourcing

8 GUIDE TO THE LME

 550
over

storage facilities across

34 locations internationally

500
almost

LME-approved brands
from 57 countries

5.2m
tonnes delivered in and out in 2019

GUIDE TO THE LME 9

What is a future?
A “future” is the obligation to buy or sell
a standard quantity of a specified asset
(metal) on a set date, at a fixed price
agreed today.

What is an option?
An “option” is the right, but not the
obligation, to buy or sell a futures contract
at a price (the strike price) agreed today.

What are prompt dates?

A “prompt date” is the date by which an
LME warrant must be delivered by the
seller and paid for by the buyer of a
futures contract. Also known as the
“settlement date”.

10 GUIDE TO THE LME

The contracts and the metals
Today’s innovation,
tomorrow’s standard
The LME’s products and services are designed with
the metal community in mind and this is what makes
the LME unique.

The LME prides itself on the unique Types of LME contracts

settlement-date structure of its contracts
LME futures
and its focus on the physical market. Physically settled contracts daily out
to 3 months, weekly out to 6 months
Designed to reflect the nature and timing and monthly up to 123 months; cash-
of bilaterally negotiated metal trades, settled contracts out to 15 months
market participants can use the LME’s LME traded options
contracts to transfer or take on risk against American-style monthly options
metal prices daily out to 3 months, weekly up to 63 months

out to 6 months and monthly out to LME TAPOS

anything up to 123 months – that’s over (traded average price options)
Asian-style monthly average-price
ten years in the future. options up to 63 months

Through our flexible prompt-date structure, Monthly Average Futures

large lot sizes that reflect industrial usage, A contract where the difference
between the ‘fixed’ price and ‘floating’
and range of contract types, the LME Monthly Average Settlement Price
provides participants with unparalleled (MASP) is financially settled
opportunity to transfer and take on risk. LMEminis
Small-lot, cash-settled monthly
What are 3rd Wednesdays? futures out to 12 months
The traditional foundation of liquidity
HKEX London Minis
on the LME is the 3-month contract; a Small-lot, cash-settled monthly
contract with a rolling prompt date. 3rd futures traded on HKEX, traded
Wednesday contracts offer participants and priced in renminbi and US dollars

the opportunity to trade LME contracts

on a fixed prompt date. The 3rd
Wednesday contracts are the monthly
futures equivalent in the LME prompt
date structure. The overall contract
specification (trading times, contract size,
and physical delivery) are exactly the same
as the 3-month contract, or any other
prompt date.

GUIDE TO THE LME 11

Contract specifications
Metal Lot size Shape Underlying metal* Contract types
Precious LME Gold 100 fine N/A Unallocated Loco Futures
metals troy ounces London Fine Gold

LME Silver 5,000 fine N/A Unallocated Loco Futures

troy ounces London Fine Silver

Non-ferrous LME Aluminium 25mt Ingots High grade Futures

Sows primary aluminium Traded options
metals
T-bars TAPOs
Monthly Average Futures
LMEminis
HKEX London Minis

LME Aluminium Alloy 20mt Ingots Aluminium alloy Futures

Small Sows Traded options
Large Sows TAPOs
T-bars
Monthly Average Futures

LME Aluminium 25mt N/A High-grade primary Futures

Premiums aluminium premium
US Premium, warrant in each
West-Europe Premium, designated region
East-Asia Premium,
South-East Asia
Premium
LME Copper 25mt Cathodes Grade A copper Futures
Traded options
TAPOs
Monthly Average Futures
LMEminis
HKEX London Minis

LME Lead 25mt Ingots Standard lead Futures

of 99.97% Traded options
purity (minimum) TAPOs
Monthly Average Futures
HKEX London Minis
LME Nickel 6mt Cathodes Primary nickel of 99.80% Futures
(full plate or cut) purity (minimum) Traded options
Pellets TAPOs
Briquettes Monthly Average Futures
HKEX London Minis
LME NASAAC 20mt Ingots ME NA380.1 Futures
Small Sows North American Traded options
Large Sows special aluminium alloy TAPOs
T-bars Monthly Average Futures

LME Tin 5mt Ingots Tin of 99.85% purity Futures

(minimum) Traded options
TAPOs
Monthly Average Futures
HKEX London Minis
LME Zinc 25mt Ingots Special high-grade zinc of Futures
99.995% purity (minimum) Traded options
TAPOs
Monthly Average Futures
LMEminis
HKEX London Minis

Minor metals LME Cobalt 1mt Cathodes 99.30% pure cobalt Futures
(broken or
cut) Rounds
Briquettes Ingots

mt=metric tonne
* Quality specifications are available at www.lme.com

12 GUIDE TO THE LME

Prompt dates Main industry uses First listed
Daily: out to 25 days Jewellery 2017
Monthly: out to 24 months
Quarterly: out to 5 years

Daily: out to 25 days Jewellery, medicine, nuclear reactors 2017

Monthly: out to 24 months
Quarterly: out to 5 years

Daily: out to 3 months Automotive, transport, construction, 1978

Weekly: 3 out to 6 months aeronautical, packaging (1987 current specification)
Monthly: 7 out to 123 months
(63 for TAPOs and traded options)

Daily: out to 3 months Automotive, transport, construction, 1992

Weekly: 3 out to 6 months aeronautical, packaging
Monthly: 7 out to 27 months

Third Wednesday of each maturity Hedge regional premium exposure; 2015

month, subject to trading regulations discover transparent on-exchange
premium prices; take delivery of
readily available metal

Daily: out to 3 months Electricals, construction 1877

Weekly: 3 out to 6 months (1986 current specification)
Monthly: 7 out to 123 months
(63 for TAPOs and traded options)

Daily: out to 3 months Batteries 1920

Weekly: 3 out to 6 months
Monthly: 7 out to 63 months

Daily: out to 3 months Stainless steel 1979

Weekly: 3 out to 6 months
Monthly: 7 out to 63 months

Daily: out to 3 months Automotive 2002

Weekly: 3 out to 6 months
Monthly: 7 out to 27 months

Daily: out to 3 months Plating, soldering 1877

Weekly: 3 out to 6 months (1989 current specification)
Monthly: 7 out to 15 months

Daily: out to 3 months Galvanisation, brass 1920

Weekly: 3 out to 6 months (1986 current specification)
Monthly: 7 out to 63 months

Daily: out to 3 months Batteries, turbines, paints 2010

Weekly: 3 out to 6 months
Monthly: 7 out to 15 months

All contracts quoted in US dollars and clearable in US dollars, pound sterling, Euro and Japanese yen

GUIDE TO THE LME 13

Cash-settled contracts
Metal Lot size Contract type Contract code Prompt dates
Non-ferrous LME Aluminium 25mt Cash-settled futures EA Monthly prompts
metals Premium out to 15 months
Duty Unpaid European
(Fastmarkets MB)

LME Aluminium 25mt Cash-settled futures UP Monthly prompts

Premium out to 15 months
Duty Paid
US Midwest (Platts)

LME Alumina 50mt Cash-settled futures AM Monthly prompts

(CRU/Fastmarkets MB) out to 15 months

Ferrous metals LME Steel HRC 10st Cash-settled futures HU Monthly prompts
N. America (Platts) out to 15 months

LME Steel HRC FOB 10mt Cash-settled futures HC Monthly prompts

China (Argus) out to 15 months

LME Steel Rebar 10mt Cash-settled futures SR Monthly prompts

out to 15 months

LME Steel Scrap 10mt Cash-settled futures SC Monthly prompts

out to 15 months

Minor metals LME Cobalt 1mt Cash-settled futures CB Monthly prompts

(Fastmarkets MB) out to 15 months

LME Molybdenum 2,205lbs Cash-settled futures MD Monthly prompts

(Platts) out to 15 months

14 GUIDE TO THE LME

Trading
Unparalleled opportunity
to transfer or take on risk

Participants wishing to trade on the LME must do

so with one of our member firms.

This can be done either directly with an LME member

or through member-sponsored access to the LME’s
electronic trading platform, LMEselect.

Counterparty risk is mitigated by LME Clear, our own

clearing house, purpose-built for the metals market.
As a Recognised Investment Exchange, the LME has
a statutory requirement to ensure that business on
our markets is conducted in a fair and orderly manner,
providing proper protection to investors. The LME is
regulated by the Financial Conduct Authority (FCA)
and the Bank of England regulates LME Clear.
The FCA also regulates those LME members
that conduct investment business.

Futures and options are traded on three platforms

at the LME.

Trading platforms at LME

The Ring | Trading hours: 11.40 – 17.00

Open-outcry trading floor. Liquidity is concentrated into five-minute sessions
known as Rings. LME Official, Unofficial and Closing Prices are all, or in part,
derived from trading activity on the Ring.

LMEselect | Trading hours: 01.00 – 19.00*

Electronic trading platform, for the trading of all LME contracts. Offers a range
of advanced features all tailored to the LME’s unique prompt date structure.

Inter-office telephone | Trading hours: 24 hours

Members’ indicative quotes are distributed via the vendor network
and can be executed by telephone.

For a full list of LME member firms, please visit our website
lme.com/trading
*LMEprecious trading hours on LMEselect 01.00-20.00

GUIDE TO THE LME 15

LME Clear
Trade and clear in one venue
LME Clear is the clearing house designed and built
specifically for users of the London Metal Exchange.
It delivers innovative clearing and settlement services
for traded transactions.

LME Clear is the central counterparty for all LME

clearing members and their trading activity. It provides
a financial guarantee to every traded contract, acting as
“the seller to every buyer and the buyer to every seller”.

In the event of a clearing member default, LME Clear will

step in and manage the defaulting clearing member’s
outstanding risk positions swiftly and efficiently.

LMEmercury, LME Clear’s dedicated clearing system,

allows members to monitor and assess the risk they are
taking on in real time. This means clearing members
have more control over their business in key areas such
as portfolio management, option expiry handling and
reporting.

LME Clear regularly introduces new services to meet

customer needs. We have added a position-transfer
service, inter-prompt spread methodology, trade
compression, warrants and offshore Renminbi
as collateral, averaging solutions and gross
segregated accounts.

lme.com/lmeclear
[email protected]

16 GUIDE TO THE LME

Other services
LME Education
The LME provides an extensive global programme of
training courses for the metal and financial industries.
Our popular introductory courses delivered in partnership
with Euromoney Training, provide the opportunity to
learn how to effectively manage the impact of price
volatility through the use of futures and options.

We also offer more advanced courses and can create

bespoke training programmes.

lme.com/education
[email protected]

Market Data
Pricing data can be accessed via the LME’s network of
vendors including LMElive, our own real-time price and
data service. LMElive offers the opportunity to monitor
price volatility with live or 30-minute delayed data and
provides a comprehensive view of futures and options
trading with easy access via your laptop, PC or mobile
device. Subscribe for a four-week free trial at:

lmelive.com
[email protected]

Contacts
Education: [email protected]
Electric vehicle battery metals: [email protected]
Ferrous: [email protected]
IT: [email protected]
LME Clear: [email protected]
LMElive: [email protected]
LMEwire: [email protected]
Membership: [email protected]
Precious metals: [email protected]
Singapore office: [email protected]
Trading: [email protected]
Warehousing and brands: [email protected]
Telephone: +44 (0)20 7113 8888
 © The London Metal Exchange (the “LME”), 2020. The London Metal Exchange logo
is a registered trademark of The London Metal Exchange.
The LME is authorised and regulated by the Financial Conduct Authority in respect of its benchmark
administration activities under the European Benchmarks Regulation (Regulation No (EU) 2016/1011)
(“BMR”).

All rights reserved. All information contained within this document (the “Information”) is provided for
reference purposes only. While the LME endeavours to ensure the accuracy, reliability and completeness of
the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or
implied, or accepts any responsibility or liability for, the accuracy, completeness, reliability or suitability of the
Information for any particular purpose. The LME accepts no liability whatsoever to any person for any loss or
damage arising from any inaccuracy or omission in the Information or from any consequence, decision, action
or non-action based on or in reliance upon the Information. All proposed products described in this document
are subject to contract, which may or may not be entered into, and regulatory approval, which may or may not
be given. Some proposals may also be subject to consultation and therefore may or may not be implemented
or may be implemented in a modified form. Following the conclusion of a consultation, regulatory approval
may or may not be given to any proposal put forward. The terms of these proposed products, should they be
launched, may differ from the terms described in this document.

Distribution, redistribution, reproduction, modification or transmission of the Information in whole or in part,

in any form or by any means are strictly prohibited without the prior written permission of the LME.

The Information does not, and is not intended to, constitute investment advice, commentary or a
recommendation to make any investment decision. The LME is not acting for any person to whom it has
provided the Information. Persons receiving the Information are not clients of the LME and accordingly the
LME is not responsible for providing any such persons with regulatory or other protections. All persons in
receipt of the Information should obtain independent investment, legal, tax and other relevant advice before
making any decisions based on the Information.

LME contracts may only be offered or sold to United States foreign futures and options customers by firms
registered with the Commodity Futures 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 30.10.
V4.0/0520/ROC

THE LONDON METAL EXCHANGE

10 Finsbury Square, London EC2A 1AJ | Tel +44 (0)20 7113 8888