LME To Launch Cash Settled, Monthly And Electronically Traded Small-Size Contracts

The London Metal Exchange (LME) has today confirmed that it will launch small-size, cash settled, electronically traded monthly futures contracts initially for copper, aluminium and zinc before the end of November 2006.

Details of the contracts, called LMEminis, are as follows:

Lot sizes of 5 metric tonnes, with the underlying specification the same as for the full-size parent contracts.
Tradable on LME Select only.
Tradable for one prompt date (Third Wednesday of the month) per month for 12 months forward.
Cash settled (i.e. not deliverable) against the Official Settlement Price of the full-size, parent LME contract announced on the cash day for the Third Wednesday settlement.
Margining will be on a daily settlement to market basis.

Commenting on the announcement, Simon Heale, LME Chief Executive said:

“LMEminis offer the market a new contract which is accessible, transparent and simple to trade. In addition, being cash-settled, the contracts are built on the reputation, credibility and liquidity of the existing LME contracts.

“This is an exciting development for the Exchange and, following plastics and steel, demonstrates our ongoing ability to explore and bring to market new products that enhance the current services that we offer.”

LMEminis - Further Details:

Initially the exchange will launch LMEmini trading in Copper Grade A, Primary Aluminium and Special High Grade Zinc, the contract size for each being 5 tonnes.
The first tradable month will be December 2006.
Trading currency will be US dollars only.
Trading will cease at 12.30 hours on the cash day for the Third Wednesday prompt.
The closing price for the relevant full-size metal contract, as at trading floor closing time, will be used for calculating margins.

Background:

The LME is the world’s premier non-ferrous metals market.
The LME turned over 78 million lots in 2005, which equates to around $4,500 billion.
Trading at the LME takes place through open outcry in ‘the ring’, through an inter-office telephone market and through LME Select.
The LME commenced trading in polypropylene and linear low density polyethylene futures contracts on 27 May 2005.
The LME announced its intention to develop risk management tools for the steel industry in October 2005 and in May 2006 confirmed that it will work with Platts to publish references prices for steel. If the references prices gain acceptance with industry the LME will consider launching futures contracts, settled against the reference prices.