The London Metal Market and Exchange Company was founded in 1877, but the market traces its origins back to 1571 and the opeПing of the Royal Exchange. At first, only copper was traded, lead and zinc were soon added but only gained official trading status in 1920. The exchange was closed over WW II and did not re-open until 1952. Other metals traded extended to include aluminium (1978), nickel (1979), aluminium alloy (1992) and steel (2008). The exchange also started trading plastics in 2005. The total value of the trade is around $US 10.24 Trillion annually.
If you want to produce, or trade copper or tin, or whatever listed on the LME, you can sell the metal to one of the many big warehouses of the LME, all over the world, and receive a warrant. This is a way to share the cost of these warehouses between the many industry participants and make it more efficient, to compete against other products.
The LME issues, each day, detailed figures on how many tons of each metal is in its warehouses, which helps producers and consumers make correct business decisions.
Trading Times: 11:45 — 17:00, London Time
Open-outcry is the oldest and most popular way of trading on the Exchange. It is central to the process of ‘price discovery’, a term used to describe the way LME official prices are established. Prices are derived from the most liquid periods of trading; the short open-outcry ‘ring’ trading sessions, and are most representative of industry supply and demand. The official settlement price, on which contracts are settled, is determined by the last offer price before the bell is sounded to mark the end of the official ring.
Ring Dealing Members are entitled to trade in the Ring during the ring-trading sessions. They may also operate a 24-hour market by trading inter-office. All Ring Dealing Members, as members of the London Clearing House, are authorised under the 2000 Financial Services and Markets Act, and are regulated by the Financial Services Authority.
There is constant inter-office trading, but a lot of trading is still done by open-outcry in the Ring. There is a morПing and an afternoon trade, where each of the eight metal contracts are traded in two blocks with a five-minute session for each contract (the sessions last from 11.45 until 13.15 and from 15.10 until 16.35, each session includes a 10-minute break). The second trading block in the morПing is key to setting the Daily Official Exchange rates. After the official trades, there is 15 minutes of «kerb» trading. Trades are in futures, options and TAPOs (traded average-price options, a form of Asian option).