London Metal Exchange
The London Metal Exchange or LME is the futures exchange with the world's largest market in options and futures contracts on base and other metals. As the LME offers contracts with daily expiry dates up to three months from trade date, along with longer dated contracts, it also allows for cash trading. It offers hedging, worldwide reference pricing and storage for physical delivery of trades.
It is located at 56 Leadenhall Street, London.
History
The London Metal Market and Exchange Company was founded in 1877 but the market traces its origins back to 1571 and the opening 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 silver (1999). Base metals are traded through LMEX since 2000. The total value of the trade is around $2,000 billion annually.
Markets
There is constant inter-office trading through the London Clearing House but some trading is still done by open outcry in the Ring. There are a morning 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 11.40 until 13.15 and from 15.10 until 16.35, each session includes a ten minute break). The second trading block in the morning is key to setting the Daily Official Exchange rates. After the official trades there is fifteen minutes of "kerb" trading. Trades are in futures, options and TAPOs (traded average price contracts, a form of Asian option).
There are eleven companies who have exclusive rights to trade in the Ring and around 100 companies involved in the LME in total.
Contrary to popular belief, the precious metals, gold and silver are not traded on the London Metal Exchange, but on the over-the-counter market usually referred to as the London bullion market, by the members of the London Bullion Market Association.