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The London Metal Market and Exchange Company was actually founded in 1877. Although trading in metals has existed for thousands of years in the UK the London Metal Exchange probably originated at the opening of the Royal Exchange in London in 1571. At the Royal Exchange traders dealt in metals and other commodities for the domestic market.
In the 19th century so many were using the Royal Exchange that business became almost impossible. Accordingly traders set up shop in the nearby city coffee houses where the tradition of Ring Trading was born. A merchant with metal to sell would draw a circle in the sawdust or with chalk on the floor and call out ‘Change’. Anyone wishing to trade would assemble around the circle.
The expression ‘kerb trading’ developed when the coffee houses closed at the end of the day forcing traders onto the street to trade on the kerb of the road.
In the 19th century during the Industrial Revolution the UK began importing large amounts of metal ore from many overseas countries. Shipping time was unpredictable putting merchants at considerable financial risk, because they had no idea where the market price would be when the metal arrived. Two technological advances in the form of the telegraph and arrival of steam shipping made it easier to predict arrival dates. These changes allowed merchants to sell metals using a forward delivery date and gain protection from a fall in the metal price.
In 1869 the opening of the Suez Canal made the delivery times even more predictable. The three-month transit time of tin from Malaya matched the three-month transit time of copper from Chile. From this evolved the LME’s system of daily prompt dates for up to three months forward.
In 1877 metal traders formed the London Metals and Mining Company. The first premises were over a hat shop in Lombard Court. Telegraphic links were installed and membership grew rapidly resulting in a permanent Exchange being built in Whittington Avenue. 98 years later the Exchange moved briefly to Plantation House, then Leadenhall Street in 1994 before moving to its current location in Finsbury Square in 2016.
As global trading volumes in base metals have grown, LME trading volumes have expanded in tandem. The Exchange has adapted to changing demands by introducing new metals. Copper and tin have traded on the LME since the beginning. Lead and Zinc officially started trading in 1920; other metal contracts in Nickel and Aluminium were added later. Today, The London Metal Exchange provides one of the world’s largest markets in futures and options contracts on base and other metals.
Hong Kong Exchanges & Clearing Limited acquired the LME in December 2012.
For a full list of current LME contracts and their specifications, click here.
Video and photograph content has been provided courtesy of the London Metal Exchange