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LME Glossary

Some of the terminology differs to that used on more traditional futures exchanges. The following is a list of some of the jargon typically used by LME traders. This list is not exclusive and more information can be obtain from the LME or by Contacting Us.

 

Approved warehouse Where the LME allows the delivery, storage and collection of LME-branded and traded metals.

Borrowing Is a form of carry trade. The simultaneous buying of a near prompt date metal and selling that metal for a later prompt date. Effectively borrowing that metal for the period.

Carry trade the simultaneous buying of a near prompt date metal and selling of that metal for a later prompt date.

Cash price the current price of cash LME contracts for delivery two days forward

Client cross A client cross is for a clearing member to register a client contract in the LME matching system for regulatory purposes.

Cross trade A trade between a member and its customer, which is not on the market but in order to be registered is entered in the matching process by the clearing member as a buy and sell to and from itself.

Kerb trading is the trading session when open outcry transactions occur freely outside of scheduled Ring times and when all or some of the LME metals are traded simultaneously

Swap The exchange of an open futures contract for some other form of collateral. It could be swapped for another futures contract, for an option contract or for physical material. (Swaps-style contracts trade on the LME under the name Monthly Average Futures.)

Lending is a form of carry trade. The simultaneous selling of a near prompt date metal and buying that metal for a later prompt date Effectively lending that metal for the period

MASP stands for Monthly Average Settlement Price. The average of the daily official settlement prices for the month.

Official Prices The last bid and offer prices quoted in the second Ring of the morning.  Often used by industry as a reference price for that day.

Pre-market is the morning trading carried out between brokers to the first LME Ring session.

Prompt Due for immediate delivery. On the LME prompt date for a cash trade is two business days forward.

Prompt dates are dates on which contract trades. Normally, you see monthly contracts. The LME is providing daily contracts up to 3 months out, then weekly and so on. Generally prompt month is the front month or nearby month that is closest unexpired month

Ring trading is the open-outcry trading floor and is central to the process of price discovery.  The LME Official Price, LME Unofficial Price and LME Closing Price are all, or in part, discovered on the trading floor

Roll is a carry transaction, where an open position is closed out and replaced or re-opened with a similar position for a prompt date further ahead.

Spot is the nearest deliverable prompt date and price. On the LME, the term cash price is more commonly used.

TAPO stands for Traded Average Price Option. It is an option exercised at the average underlying price over the period of the options life

TOM is an abbreviation of Tomorrow, which in LME terms means the next trading day.

TOM/Next Is an abbreviation of Tomorrow/Next. Within the LMEs normal two day settlement, a position may have a prompt date of one day forward. In this instance, it is possible to trade a TOM /NEXT up to the first Ring of that day which allows a position to be rolled forward to the official cash date, on the payment of a fee.

Warrant A document of possession, issued by the warehouse company, for each lot of LME-approved metal held within an LME-approved   facility. Purchasers of LME contracts, which are kept open to maturity, will receive a warrant for a specific LME approved warehouse to take delivery of the metal, if required.

 

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Content has been provided courtesy of the London Metal Exchange

 

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Five Ways to Get The Most Competitive Carry Rate

Deal with broker that offers a price generated from several market makers as opposed to a single market maker who offers no choice in price and whose price may not be competitive.

Work with your broker by giving the complete order with direction to ensure a fair price is achieved between client and market maker for the full size.

Provide feedback on the levels provided to see if improvements can be achieved.

Work an order with your broker at a level that you wish to trade at, good for the day or good until cancelled to take advantage of any potential market movements.

Check the previous nights valuation with your broker prior to execution of your trade.

Are you happy with your carry rates and phone broking? Try us today with no obligation.