U.S. COMMODITY FUTURES TRADING COMMISSION

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1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

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www.cftc.gov

Aluminum Futures Market CFTC Staff Report

This document and the attached Aluminum Futures Market CFTC Staff Report is responsive 

to Congressional Directives of Division A - Agriculture, Rural Development, Food and Drug 

Administration, and related Agencies Appropriations Act 2022, accompanying H.R. 2471, the 

Consolidated Appropriations Act 2022, ( P.L. 117-103). Specifically, within 180 days of enactment 

of this Act, the CFTC is directed to issue a public report on factors affecting the aluminum 

commodities market.1

 

This Aluminum Futures Market CFTC Staff Report and the attached slides do not contain 

data or information that would separately disclose the business transactions or market positions of 

any person and trade secrets or names of customers. Cf. Section 8(a) and 8(e) of the Commodity 

Exchange Act (“CEA”), 7 U.S.C. § 12(a), (e). This Aluminum Futures Market CFTC Staff Report 

is based upon cash and futures market information available to staff as of June 30, 2022, and any 

different, changed, or omitted facts or circumstances may require additional analysis. Staff also 

notes that access to proprietary data and premium calculations or trade methods could bring 

different observations. Every effort has been made to ensure data accuracy. 

Background 

For non-ferrous metals like aluminum, the Shanghai Futures Exchange (“SHFE”) and LME 

are the leading futures exchanges. The LME is a registered FBOT with the CFTC, which allows 

participants located in the United States direct access to electronic order entry and trade matching 

systems (see section on CFTC’s Authority below). The COMEX lists various aluminum futures 

contracts for market participants including end users and producers.2

 

The London Metals Exchange’s (“LME”) aluminum contracts are a primary price discovery 

market for global aluminum prices. LME’s registered Foreign Board of Trade (“FBOT”) status gives 

U.S. customers direct electronic access to its markets. All-in reference prices in the U.S. are derived 

by adding a location differential to the LME price. Price Reporting Agencies (“PRAs”) publish price 

 

1

 “Market surveillance oversight.—Last year, the Committee requested CFTC to look into the aluminum futures market. 

The Committee remains interested in CFTCs review of aluminum futures markets and its impact on pricing 

for aluminum end users and directs CFTC to provide a report to the House and Senate Committees on Appropriations 

within 60 days of the review’s completion. The Committee expects CFTCs market surveillance branch to take prompt 

action, if warranted, to ensure that aluminum end users are protected from fraud, manipulation and abusive practices 

that are prohibited by the Commodity Exchange Act.” H.R. Rep. 116-446 (2020).

2 COMEX lists one physically delivered aluminum future, plus various financially settled contracts. See

https://www.cmegroup.com/trading/metals/aluminum-futures.html for more information on these products.
2 

assessments for location differentials. In the U.S., the predominant aluminum differential is the

Midwest Premium (“MWP”). Futures trading in U.S. aluminum futures contracts is primarily in the 

Chicago Mercantile Exchange’s Commodity Exchange (“COMEX”) MWP futures contract. 

Reference points for prices for physical metals that are traded globally, such as aluminum, 

consist of two components: a global benchmark price plus a locality differential. The differential is 

designed to reflect changes in price due to local supply-demand conditions, such as transportation 

costs, and directly affects the all-in reference price for delivered metal. In the U.S., the predominant 

locality differential is the MWP. 

Several PRAs publish spot or price assessments for a variety of commodities. S&P Global 

Platts, a division of S&P Global Inc (“Platts”), and Harbor Aluminum Intelligence Unit LLC 

(“Harbor”) are two PRAs that publish aluminum MWPs. The COMEX lists the Aluminum MW U.S. 

Transaction Premium Platts (25MT) (“COMEX MWP”), financially settled futures contract where 

the final settlement value is based on the Platts MWP. 

COMEX contracts, including the COMEX MWP, represent less than 1% of global aluminum 

financial markets in notional value. According to the LME, daily volume for LME aluminum futures 

averages 200,000 contracts per day.3 Based on COMEX data submitted to the CFTC, the average 

daily volume across all of COMEX’s aluminum futures for the calendar month May 2021 was 1,088 

contracts per day. 

The CFTC’s Authority

The CFTC holds primary regulatory authority over Designated Contract Markets (“DCMs”) 

and Swap Execution Facilities (“SEFs”). These markets are registered with the CFTC and required 

to comply with many core principles and associated CFTC regulations that govern the operation of 

their facilities.4 All DCMs and SEFs are required to either self-certify to the Commission that new 

contracts comply with the CEA and CFTC regulations or submit those contracts to the CFTC for 

review and approval before offering them for trading.5

 Particularly relevant here, Core Principle 3 

for both DCMs and SEFs requires that these entities list only contracts that are not readily susceptible 

to manipulation.6 In addition, Appendix C to Part 38 of the CFTC’s regulations provides non-binding 

guidance for use in determining whether a contract is readily susceptible to manipulation.7

 

The Appendix C guidance states that when evaluating the susceptibility of a cash-settled 

contract, such as the COMEX MWP, to manipulation, the DCM should consider the size and liquidity 

of the underlying cash market and design the terms and conditions of the contract to avoid any 

impediments to convergence. 17 C.F.R. pt. 38 App. C. For cash-settled contracts, Appendix C notes 

 

3 For additional information on LME aluminum, see https://www.lme.com/-/media/Files/Education-and-events/Onlineresources/Brochures/Non-ferrous/LME-Aluminium-factsheet.pdf?la=en-GB 

4 For DCMs, see CEA section 5(d), 7 U.S.C. § 7(d) and 17 C.F.R. Part 38; for SEFs, see CEA section 5h(f), 7 U.S.C. § 

7b-3(f); 17 C.F.R. Part 37. 5 17 C.F.R. §§ 40.2-40.3. 6 For DCMs, see CEA section 5(d)(3), 7 U.S.C. §5(d)(3); 17 C.F.R. § 38.200 (2012). For SEFs, see CEA section 

5h(f)(3), 7 U.S.C. § 7b-3(f)(3); 17 C.F.R. § 37.300 (2013).

7 17 C.F.R. Part 38, Appendix C. CFTC regulation 37.301 notes that this guidance is also applicable to SEFs. 17 

C.F.R. § 37.301.
3 

that DCMs should give appropriate consideration to the commercial acceptability and robustness of 

the cash price series. Also, each cash-settled contract’s price series should be based on publicly 

available prices and should be available on a timely basis for calculating the cash settlement price at 

the expiration of the commodity contract. 

The CFTC’s Division of Enforcement furthers the CFTC’s mission to protect market users 

and the public from fraud, manipulation, and abusive practices that are prohibited by the CEA. In 

addition, analysts within the Market Surveillance Unit of the Division of Enforcement work to detect 

potential violations, which are then referred to an investigative team within Enforcement. While the 

CFTC does not have direct regulatory authority over cash metals markets, it does have authority to 

address fraud or manipulation in those markets. 

LME is regulated by the Financial Conduct Authority (“FCA”) in the U.K. It is registered 

with the CFTC as an FBOT only for the purpose of permitting direct access trading for U.S. persons, 

and the CFTC’s oversight of LME is limited to the aspects of this direct access.8 LME has been able 

to offer its aluminum contract for direct access trading since receiving a staff no-action relief letter 

on March 12, 2001 (CFTC Letter No. 01-11). That letter was superseded by an Order of Registration 

issued pursuant to CEA section 4(b)(1) and Part 48 of the CFTC’s regulations on October 31, 2016. 

Should it be deemed necessary, the CFTC, under Part 48, can impose additional requirements and 

conditions on the direct access trading and could, under the worst scenario, revoke the Order, thereby 

prohibiting trading by direct access.9 It should be noted that prohibiting direct access trading does 

just that, and U.S. persons could continue to trade LME contracts by other means. 

The CFTC and the FCA are both signatories to the International Organization of Securities 

Commissions (IOSCO) Multilateral Memorandum of Understanding Concerning Consultation and 

Cooperation and the Exchange of Information (MMoU), revised May 2012, and the IOSCO Enhanced 

MMoU (EMMoU), dated 2016. The MMoU and EMMoU enable the CFTC to request the FCA’s 

assistance in obtaining data from the LME in connection with enforcement investigations. 

Neither commodity warehouses nor PRAs, such as Platts or Harbor, are registered with the 

CFTC in any category of registration or oversight. The CFTC, therefore, has no direct regulatory 

authority over warehouses, wherever located, or their provision of commodity information. Nor does 

the CFTC have direct authority over the PRAs such as Platts or Harbor. However, as noted above, 

the CFTC has enforcement authority for commodities in interstate commerce and can bring actions, 

as appropriate, for manipulative activity, including false reporting, and fraud. Further, CFTCregistered DCMs and SEFs may have contractual arrangements with both warehouses and PRAs in 

connection with their marketplaces. If such arrangements were to impact the ability of a DCM or SEF 

 

8 CFTC Regulation 48.2(c) defines direct access as “an explicit grant of authority by a [FBOT] to an identified member 

or other participant located in the United States to enter trades directly into the trade matching system of the [FBOT].” 

17 C.F.R. § 48.2(c).

9 In 2014-15, CFTC staff held frequent dialogue with LME’s senior leadership, as well as with UK regulatory 

authorities to understand LME’s perspective on aluminum contract and warehouse issues, and to assess LME’s 

proposals for resolving such issues. Within the limits of its jurisdiction over LME as an FBOT, CFTC staff made 

recommendations for addressing issues in the aluminum contract and related warehouse practices, and encouraged LME 

to move promptly to address problem areas. CFTC staff monitored market conditions, LME’s implementation of 

responsive measures, and legal developments in UK courts that impacted the scope and timing of any responsive 

measures to be undertaken by LME. 
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to comply with its respective regulatory obligations, such compliance issues would come within the 

CFTC’s authority and oversight responsibility. 

Contacts

For further information or clarification, please contact Ann Wright, Director, Office of 

Legislative and Intergovernmental Affairs, CFTC. She is reachable by phone at 202-418-5594 or 

email at AWright@CFTC.gov.