The London Metal Exchange has today announced it will launch a Cleared Average Price Swap (CAPS) service on Monday 31 March 2008.
The new CAPS contracts are a monthly average price swap, settled in cash against the Exchange’s underlying non-ferrous metals contracts.
They will be accessible to category 1 and 2 members only.
CAPS contracts will be available for the Exchange’s eight non-ferrous metals: Primary Aluminium, NASAAC, Aluminium Alloy, Special High Grade Zinc, Tin, Nickel, Copper Grade A and Standard Lead.
Commenting on the launch, Emma Davey, LME Membership and Business Development Manager said:
“The launch of the CAPS service is a new development in the LME’s ongoing expansion of service offerings to its members. This service is the first step in the Exchange’s plans to provide greater efficiency to the post-trade environment in our core metals products.
“Cleared average price swaps will allow category 1 and 2 members to put their member-to-member transactions through to clearing at LCH.Clearnet with the resulting advantages of a central counterparty”.
LME CAPS – further details- A CAPS contract is not tradeable on the Exchange, but is agreed bilaterally “off-Exchange” and brought on to the Exchange for matching and clearing in accordance with the LME Rules and the Rules & Regulations of LCH.Clearnet Ltd.
- CAPS contracts are only available for Category 1 and 2 members.
- CAPS contracts are available for the Exchange’s eight non-ferrous metals.
- Each CAPS contract has the lot size and number of tradeable months shown in the following table:
Metal
Lot size (tonnes)
Months
Primary Aluminium
25
63
NASAAC
20
27
Aluminium Alloy
20
27
Special High Grade Zinc
25
27
Tin
5
15
Nickel
6
27
Copper Grade A
25
63
Standard Lead
25
15
- The near month for CAPS contracts will expire on the last business day of the month. A new forward month will become available on the first business day of the month.
- Only Category 1 and 2 members may input a CAPS contract into MCS. For any tradeable month, 12:30 on the last business day of the month is the latest trade time that the matching system will accept. Matching will close at 20:00.
- The prompt date for each tradable month will be two business days after the last business day of that month.
- CAPS contracts will be cash settled on the prompt date. Settlement will be made by reference to the average monthly settlement price for each metal known as the MASP (Monthly Average Settlement Price). The MASP is already published by the Exchange for use in TAPOs. The amount due on the prompt date will be the difference between the MASP and the amount agreed in the contract.
