The principle features of the “2 by 2” strategy are to bolster the LME’s existing suite of deliverable, non-ferrous futures contracts with:
- Financially settled non-ferrous Futures contracts;
- Cleared non-ferrous OTC contracts;
- Steel Futures and OTC contracts ; and
- Bilateral and cleared OTC contracts in other metals.
The Exchange has started a wide-ranging consultation on the strategy with shareholders and the outcome of these discussions will lead to the formulation of an implementation plan to be presented to the Board within the first quarter of 2007.
Commenting on the strategy, Martin Abbott, LME Chief Executive said:
“There is no “for sale” sign over the LME. As far as I am aware, none of my shareholders is asking me to take the Exchange down that route. What they are asking me to do is to ensure the provision of orderly, liquid markets in a range of instruments for which there is genuine market demand. There is certainly room in the exchange space for a stand-alone, metals-focused exchange that does this.
“The LME has been the world-leader in non-ferrous metals trading for 130 years. My vision for the LME is powerfully simple: to strengthen this leadership and extend it into areas where the LME has true competitive advantage. Our links with industry will remain strong, and will deepen further. The “2 by 2” strategy is tailored to the LME’s unique combination of skills, experience and relationships. Most importantly, it will deliver enormous opportunity to the LME’s members, industry and the financial community.”
Background
- The LME is the world’s premier non-ferrous metals market and had volumes of 78 million lots in 2005, volumes in 2006 although not yet announced, are likely to exceed this.
- Trading of the ‘parent’ LME contracts takes place through open outcry in ‘the Ring’, through an inter-office telephone market and through LME Select.
- The LME launched LMEmini contracts, for Copper Grade A, Primary Aluminium and Special High Grade Zinc on 4 December 2006. The LMEminis are cash-settled monthly contracts, in smaller tonnages than standard LME contracts, and traded electronically, via LME Select, and on the Exchange’s 24 hour telephone market.
- The LME is a demutualised, shareholder-owned organisation that currently operates a model in which fees are kept to a minimum and all surpluses are rebated to shareholders.
