London Metal Exchange

The London Metal Exchange (LME) is a prominent futures and forwards exchange based in London, United Kingdom. Established in 1877, it is renowned for being the largest market globally for standardized forward contracts, futures contracts, and options on base metals. The LME also offers contracts on ferrous metals and precious metals, serving as a critical hub for metal trading worldwide.
== Ownership and Management ==
The LME is owned by Hong Kong Exchanges and Clearing Ltd (HKEx), which acquired it on December 6, 2012. This acquisition marked a significant consolidation in the commodities exchange sector, aligning the LME with one of Asia's leading exchange operators.
== Products Traded on the London Metal Exchange ==
The London Metal Exchange (LME) offers a diverse range of trading products, primarily focusing on metals. These include:
*Futures Contracts: Available for eleven metals, including primary aluminium, copper, zinc, lead, nickel, tin, NASAAC, aluminium alloy, cobalt, and molybdenum. These contracts specify delivery on a set date with defined lot sizes, such as 25 tonnes for primary aluminium, copper, zinc, and lead, and 6 tonnes for nickel and molybdenum.
*Traded Options Contracts: These American-style options allow the right to buy or sell underlying futures contracts for all LME metals. They can be exercised at any point during their life.
*Traded Average Price Options (TAPOs): Asian-style options providing a hedging tool based on a monthly average price, allowing participants to buy or sell metal at the average LME price for a given month.
*LMEX: An index contract based on a basket of metals, including copper, primary aluminium, zinc, nickel, tin, and lead. Both futures and options are available, although the LMEX has not been actively traded for some time.
*Mini-Contracts: Smaller contracts for primary aluminium, copper, and zinc, traded in lots of five tonnes.
*LMEswaps: Monthly average price futures contracts settled in cash, available for primary aluminium, aluminium alloy, copper, zinc, lead, nickel, NASAAC, and tin. These contracts are settled based on the difference between the agreed fixed price and the average monthly price.
These products provide a suite of options for hedging, investment, and risk management in the metals market. The LME also facilitates cash trading and offers the option of physical delivery to settle contracts, making it a vital resource for producers and consumers of metals.
== Trading Methods ==
The LME employs three primary methods for trading metals:
* Open Outcry: Known as "ring trading," this traditional method involves traders meeting face-to-face. The LME is the last exchange in Europe to maintain this practice, although it temporarily closed during the COVID-19 pandemic. Ring trading is conducted by open outcry during morning and afternoon sessions. 
* Electronic Trading: Through the LME Select platform, launched in 2001, electronic trading has become a significant part of the exchange's operations. This platform supports most of the LME's business and reflects the broader industry trend towards digital transactions.
* Telephone Systems: A more conventional method that complements the other trading systems. Inter-office trading involves bilateral trading of LME contracts, typically conducted by telephone, and can occur 24 hours a day. Unlike ring trading, which only involves Exchange Contracts, inter-office trading includes both Exchange and Client Contracts. It operates on a quote-driven basis, with dealers providing bids and offers over the phone.
==Background & the Ring==
The LME has traditionally catered to physical producers and consumers of industrial metals, allowing hedging on specific dates to match company risks.
The LME is a highly liquid global market with an international membership. Because it is a principal-to-principal market, the only organizations able to trade on LME are its member firms, of which there are various categories. LME members provide the physical and financial industry access to the market, to the risk management tools and to the delivery mechanism. 
The LME's Ring was temporarily closed and the exchange switched to all-electronic pricing on March 23, 2020 (with prices calculated on the basis of electronic market activity on LMEselect) due to the outbreak of COVID-19. In comments made at the LME's annual metals seminar on October 19, 2020, CEO Matthew Chamberlain proposed keeping the trading floor closed until early 2021 given the continued rise of the coronavirus. On January 19, 2021, the LME proposed permanently closing its open outcry Ring and moving to an electronic pricing structure. CEO Matthew Chamberlain stated that during the pandemic-related closure, the LME maintained consistently high volumes of activity with electronic trading and was able to provide market participants with direct access. 
Nevertheless, because of a backlash from major users, in June 2021 the LME canceled plans to close the Ring and said it would reopen on September 6.
On August 9, 2021, the LME announced that, following the results of its consultation on a proposed split pricing structure, LME official prices would be discovered on the Ring, while closing prices would continue to be determined electronically. This structure caters to both smaller physical customers – who use official prices in their contracts and overall prefer those to be determined in the Ring – as well as financial and larger physical users, who focus primarily on closing prices and generally favor electronically derived pricing, the exchange said.
== Key People ==
=== Executive Committee ===
* Matthew Chamberlain, Chief Executive
* Alistair Baldwin, Chief Technology Officer
* Sarah Burdett, Head of Human Resources
* Kirstina Combe, Chief Risk Officer
* Georgina Hallett, Chief Sustainability Officer and Chief of Staff
* Miriam Heywood, Head of Corporate Communications
* Robin Martin, Head of Market Development
* Tabitha Silverwood, Chief Financial Officer
* Susan Small, General Counsel and Head of Enforcement
* Kate Smith, Head of Market Data
* Jamie Turner, Chief Operating Officer
=== Board of Directors ===
*John Williamson, LME Chairman
*Matthew Chamberlain, LME CEO
*Bonnie Chan, LME Executive Director
*Nicholas Allen, LME Non-Executive Director
*Martin Fraenkel, LME Independent Non-Executive Director
* Antony Stuart, LME Independent Director
* Nigel Dentoom, LME Non-Executive Director
* Richard Leung, HKEX Group Chief Technology Officer.
* Pierre Vareille, LME Independent Non-Executive Director
* Vanessa Lau, Director
* Richard Wise - HKEX Group Risk Officer
== Acquisition by Hong Kong Exchanges ==
HKEx Chairman Charles Li, with then-LME CEO Martin Abbott
On July 25, 2012, LME shareholders approved a $2.2 billion takeover offer from Hong Kong Exchanges and Clearing Ltd. The vote was more than 99 percent in favor of the deal, according to an LME spokesman. HKEx's proposal won out over offers from its rivals CME Group, Intercontinental Exchange and NYSE Euronext. Sixty-seven stockholders controlling 12.86 million shares voted on the transaction, with 64 owners holding 12.82 million shares backing the bid. In a separate tally at an extraordinary general meeting, 12.75 million shares, or 99.24 percent, were voted for the sale and 98,000 against. 
According to HKEx, the deal will help grow the number of clients in China and will help disperse LME data across Asia. In addition, HKEx said it would "keep the LME’s existing warehousing network, help the bourse develop its own clearing house and freeze trading fees until at least the start of 2015." 
The LME continues to be based in London and is regulated by the FCA. 
The LME’s clearing house, LME Clear, launched on September 22, 2014. 
On September 29, 2014, the LME announced it would increase transaction fees by 34%, starting in January 2015. The move was intended to help cover the rising cost of the regulatory environment and necessary system upgrades following the purchase of the LME by HKEx. However, in December 2014, the LME cut the proposed increase to 31 percent after complaints by members.
== History and Ownership ==
The LME was founded in 1877 as the London Metals and Mining Company, providing contracts in tin, adding lead and zinc in 1920, aluminum in 1978 and nickel in 1979.
The LMEX Index, its first index product, was started in 2000. The move into ferrous metals started with steel contracts in February 2008.
LME Holdings has two classes of members. Ordinary share members hold the equity rights, and transfer is restricted to existing and new members, with Class B holders allowed only to trading and clearing rights, though these can be bought and sold. The exchange released new B shares in 2007 to meet demand from brokers and merchants.
On July 24, 2014, LME announced that it would upgrade its network service to provide three access levels to its electronic systems, including one geared to participants seeking lower latency. The exchange worked with Colt Technology Services to launch LMEnet, a dedicated network that will allow market participants to connect to all of the exchange's electronic systems, including LME Clear. The initiative uses Colt’s trading network PrizmNet to help streamline latency, performance and connectivity for LME users. The premium package will link clients directly into LME data centers, providing “dedicated low-latency connectivity,” the exchange said. The standard service is geared to providing trading, matching, clearing and market data for market participants not focused on low-latency trading.
In March 2015, the LME announced it had entered into an agreement with Borsa İstanbul under which Borsa İstanbul would acquire the LME’s stake in clearing house LCH.Clearnet, and Borsa İstanbul, the LME and the LME’s parent company Hong Kong Exchanges and Clearing (HKEx) would partner on the dissemination of market data. Under the terms of the agreements, the LME licenses its steel billet settlement data to Borsa Istanbul, and works with the Turkish exchange to develop future products and services for the steel market.
In February 2016, the LME relocated to new offices at 10 Finsbury Square. The Exchange's open-outcry trading venue, the Ring, was also moved to the new location, where £1 million was invested in enhanced technology, including new wall boards to help integrate Ring and LME electronic pricing and to provide more real-time information to inform traders’ decision-making. The new offices were formally opened by President of Chile Michelle Bachelet in a ribbon-cutting ceremony in May 2016.
===Video ===
== Structure and Regulation ==
The LME operates three side-by-side trading systems. The original open-outcry floor, known as "The Ring," operates from 11:45 a.m. to 5 p.m. London time. The LMEselect electronic system, introduced in February 2001, runs from 1 a.m. to 7 p.m. - extending hours into the Asian trading day in June 2006. And the exchange also operates 24-hour telephone trading among members.
In June 2014, after a six-month internal review and discussions with market participants, the LME said it had decided to maintain and further invest in its open-outcry trading floor. Since then, the LME has invested hundreds of millions in upgrading its technology. It also announced that it will relocate its trading floor from Leadenhall Street in the City of London to a new building a mile north in Finsbury Square.
The exchange operates as a market of "last resort" and provides physical delivery – though used in less than 1 percent of trades – through a network of more than 600 warehouses in 15 countries.
The LME is self-regulatory organization overseen by the UK Financial Conduct Authority.
On October 30, 2017, the LME announced the delivery program for their "strategic pathway" including several new product launches and changes in memberships, including carry trade fee reductions, tick size review, implied pricing and trade-at-settlement functionality on LMEselect, and the addition to LMEprecious of gold and silver options, with platinum and palladium futures to follow.
In April 2019, the exchange introduced a code of conduct that set behavioral standards expected of LME Group staff members and member employees, as well as LME-branded events. The move came after criticism of an event thrown by the metals trading firm Gerald Group at London’s Playboy Club using the LME Week brand in 2018. 
== Queuing Questions ==
In 2013, several plaintiffs in the U.S. brought class action suits, in some of which the LME was named as a co-defendant, alleging that warehouse owners such as Goldman Sachs and JPMorgan, along with mining company Glencore Xstrata, restricted supply and thereby inflated the price of aluminum. All three companies, as well as the LME, denied the claims and said they are without merit.
The cases were brought after some users complained about the long waits to get metal, particularly aluminum, out of LME warehouses. The biggest warehouses have been taking more than a year to release the aluminum. The LME has proposed forcing warehouses with long queues to load out more metal.
At the beginning of July 2013, the exchange announced a three-month consultation period on proposals to amend its warehouse regulations again to calibrate deliveries into the sheds with deliveries out. (The initiative only applies to locations where the delivery-out queue already stretches to more than 100 days.)
On November 7, 2013, the LME proposed a rule that would link the amount of LME-traded metal an exchange-approved warehouse could accept for storage to the amount of the same metal it released whenever the warehouse could not process requests to discharge the same metal from storage in less than 50 days. (This proposal is known as the “LILO” rule, for "load-in/load-out.") However, the exchange was forced to postpone the implementation of the new rule, which scheduled for April 1, 2014, after the its decision process was challenged in a lawsuit by Rusal. A U.K. judge ruled in favor of Rusal, who claimed that the decision process was “unfair and unlawful”. The judge ordered a review of the LME consultation. 
In October 2014, the UK’s Court of Appeal ruled that the LME’s consultation process for its proposed rule changes was not unfair or unlawful, overturning the previous ruling. After winning the appeal, the LME said it would implement the new rule aimed at cutting the warehouse logjams after a two-week consultation with warehouses starting Oct. 9.
In November 2015, the LME launched four regional aluminum premium contracts that allow consumers to hedge against the premiums paid to producers on top of the metal's price, as part of the exchange's attempt to reform its warehousing system. Premiums had been rising because of the lengthy queues. The contracts are designed to work alongside the ‘parent’ LME Aluminium contract and involve a swap of warrants. 
The exchange also added three new delivery locations in 2014, extending its global network of warehouses to Kaohsiung in Taiwan, Moerdijk in the Netherlands and, for copper only, Panama City in the United States.
On August 5, 2014, the LME published its first Commitments of Traders Report (COTR) in response to general market demand for broader transparency. The COTR is designed to reflect the nature of the predominant business activity that LME members and their clients are involved in. The report is designed to be viewed in conjunction with the existing daily warrant banding reports published each day by the LME in accordance with its Lending Guidance. The COTR is published on a weekly basis and will consist of a report for each business day of the previous week. According to the LME's head of business development, the publication of the reports was requested by the physical industry following the LME's 2013 warehousing consultation.
Queuing issues and very long waits continued. In in June 2021, there was a 168-day wait for metal at Istim Metals warehouses in Malaysia. In June 2024, the wait to take delivery of aluminum on the London Metal Exchange went from zero to more than five months after a massive delivery of metal from Trafigura Group in May of 2024. In July of 2024 the wait time to take delivery from Istim warehouses in Port Klang stretched out to 280 days.
==Nickel Market Crisis==
In March of 2022, there was a crisis in the exchange's nickel market that had lingering ramifications for the exchange. Supply worries after Russia invaded Ukraine and the cutting of large short positions culminated on March 8 in trading in which prices doubled to above $100,000 a tonne in a matter of hours. The exchange shut down nickel trading for more than a week and unwound all of the Tuesday morning trades, reverting the price to Monday’s final price of $48,078. When nickel finally reopened on March 16, it traded down on very low volume until it reached a more "normal" price of about $28,000 the following week. This was the first time the LME had suspended the market since 1988. 
Tsingshan Holding Group Co., the world's top nickel producer, faced billions of dollars in trading losses in the crisis as prices jumped more than 250% in just over 24 hours, and the LME’s decision to cancel trades on March 8 effectively served as a bailout for Tsingshan Holding Group and other holders of short positions.
In January of 2023, an independent review of the nickel crisis conducted by the consultancy Oliver Wyman found that the LME had insufficient tools to stop prices spiraling out of control. The report said the exchange should strengthen its rules and oversight to prevent short-term market distortions.
In November of 2023, the London Metal Exchange won an important legal victory against traders who sued over its decision during the crisis to cancel $12 billion worth of nickel trades. England’s High Court dismissed accusations by the hedge fund Elliott Management and the market maker Jane Street that the LME acted unlawfully.
== Volumes ==
===2015===
In 2015, 170 million lots were traded on the LME, the equivalent of 4 billion tonnes and $12 trillion in notional value.
===2012===
Volumes in December of 2012, the year in which the acquisition by HKEx was completed, were 10 percent higher year-on-year. 
The exchange also won six industry awards in that year. By 6 December 2012, the completion date for the acquisition, 149.6 million lots had traded on the LME, the equivalent of 3.5 billion tonnes and $13.6 trillion. 
===2010===
The LME on July 28, 2010 merged its Far East Asia and Mediterranean steel billets contracts into a single derivative, hoping to create a global benchmark. The exchange also added a delivery point in the United States, to complement current ones in Europe and Asia. Trading activity in the exchange’s Mediterranean steel billet futures contract grew 385 percent to 57,606 lots ahead of the planned merger with the Far East steel billet contract. 
Year	Total Annual Volume	Percent Change
2021	144,953,079 	(-) 6.39
2020	154,848,115 	(-) 11.92
2019	175,804,223 	(-) 4.86
2018	184,783,551 	17.44%
2017	157,341,593 	
2016	156,491,501 	(-) 7.7%
2015	169,540,184 	(-) 4.3%
2014	177,138,349 	3.5%
2013	171,099,643 	7.1%
2012	159,719,781 	9.0%
2011	146,597,545 	21.9%
2010	120,258,119 	7.4%
2009	111,930,828 	--
== Product Development ==
The LME has evolved from its roots as an exchange for non-ferrous metals contracts in the wake of a changing customer profile and intensifying competition, notably from the Shanghai Futures Exchange, which vies with its UK rival as the seat of the largest metals complex.
The LME introduced futures on steel billets on its electronic and phone system on February 28, 2008 and on open outcry on April 28. Steel is the most actively traded commodity after oil. Past efforts to launch steel futures had faced resistance from the producer community. The contracts cover two regions: Mediterranean and Far East. Both contracts are physically deliverable; the initial delivery points include Turkey, Dubai, Malaysia and South Korea.
The existing complex was expanded with LMEmini contracts, for LME Copper Grade A, LME Primary Aluminium and LME Special High Grade Zinc on Dec. 4, 2006.
Plastics futures were introduced in May 2005, with contracts for polypropylene and linear low density polyethylene. However, in October 2010, the LME announced these contracts would be delisted, with a final prompt date of 29 April, 2011.
Aluminum contracts remain the most heavily traded on the exchange. Copper Grade A ranks second, followed by zinc, lead, nickel and tin, with options offered alongside the futures contracts.
In November of 2008, the LME upgraded its electronic trading platform LMEselect, in cooperation with Cinnober Financial Technology, who also delivered the previous platform. The exchange contended that the upgrade would provide a more robust system that offers operational efficiencies. The upgrade came on the back of a record trading month for the exchange. Exchange volumes were up 44 percent in October compared to the corresponding period of 2007 with 11,218,308 lots traded. LMEselect also recorded an increase of 23 percent on its previous record month.
The exchange launched contracts for molybdenum and cobalt in 2010.
The LME on July 28, 2010 merged its Far East Asia and Mediterranean steel billets contracts into a single derivative, which it hoped would create a global benchmark. The exchange also added a delivery point in the U.S., to complement current ones in Europe and Asia.
On December 1, 2014, the LME took over the procedure for the platinum and palladium fixings in London from BASF Metals Ltd., Goldman Sachs Group Inc., HSBC Holdings Plc and Standard Bank Plc.
At "LME Week" in London in Oct. 2014, the exchange announced the launch of Asian contracts for aluminium, zinc and copper in Hong Kong, to start in December and be denominated in renminbi. The contracts are called “minis” because they offer lots of 5 tonnes rather than the standard 25 tonnes, and they are targeted toward China’s numerous retail investors. They are cash-settled on the third Wednesday of each maturity month rather than physically settled as in the traditional LME contracts.
The LME launched two new cash-settled ferrous metals products, LME Steel Scrap and LME Steel Rebar, in November of 2015. The cash-settled futures contracts can be traded monthly out to 15 months and have a lot size of 10 tonnes. The LME's first voice-brokered trade of its LME Steel Scrap contract was executed on May 4, 2016 by INTL FCStone Ltd on behalf of Stemcor.
=== LMEprecious ===
In August of 2016, the LME, the World Gold Council and a group of six banks and trading firms announced a new trading platform called LMEprecious to trade precious metals. The platform launched gold futures trading on July 10, 2017, the first gold futures contract offered at the LME in 30 years. It traded 25,590 lots in its first week. The exchange had made one previous attempt to trade gold, but the venue ended up closing in 1985 after only three years for lack of domestic investor and speculator interest. LMEprecious currently trades 100 oz gold and 5,000 oz silver futures contracts.
The exchange set up LMEprecious in partnership with a group called EOS Precious Metals in February 2017 with Goldman Sachs, ICBC Standard Bank, Morgan Stanley, Natixis, proprietary trading firm OSTC and Societe Generale.
In October 2019, it was reported that LME was in talks with trading firm XTX Markets, to sell it a stake in EOS Precious Metals.
== Product Listing ==
Non-Ferrous Metals
* LME Aluminium
* LME Aluminium Alloy
* LME Copper
* LME Lead
* LME LMEX
* LME LMEmini
* LME NASAAC
* LME Nickel
* LME Tin
* LME Zinc
Steel
* LME Steel Billet
* LME Steel Scrap
* LME Steel Rebar
Minor Metals
* Cobalt
* Molybdenum
== Sustainability at LME ==
Information about LME's corporate commitment to sustainability can be found on its website here.
== Resources ==
*London Metal Exchange
For information about the LME please visit http://www.lme.com.
*LMElive.com
For real time or 30-minute delayed prices and data direct from the LME sign up for a free trial of LMElive at http://www.lmelive.com.
== References ==
Category:Exchanges
Category:Futures Exchanges
Category:European Exchanges
Category: Metals
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