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The London Metal Exchange index contract, comprising the six LME primary metals; aluminium, copper, lead, nickel, tin and zinc.
The LMEX contract provides one single liquid reference point that tracks the performance of the world’s most traded non-ferrous base metals contracts.
Developed as an investment vehicle, LMEX futures and traded options contracts provide opportunities for investors and fund managers to improve the risk/return characteristics of any metals-exposed investment portfolio. For investors new to metal trading, the LMEX provides users with an easy to manage exposure to the LME primary metals, without the commitment of physical delivery that is a characteristic part of the individual metals contracts.
As an exchange developed contract, LMEX also offers transparency with the security of clearing, stability through regulation, and a global trading structure that are the hallmarks of the world’s leading base metals exchange.
Extensive statistical analysis of the performance of LMEX has been undertaken using historical prices dating back to the early 1970s. The results show that the index performs particularly well as part of a portfolio, providing diversification benefits when combined with equities and bonds.
LME Contract weighting
Key to the integrity of the index is ensuring that the weighting of its components provides a true representative value of the overall non-ferrous base metal market.
The weights of LMEX have been derived from the global productions volume and trade liquidity (LME) of each of the six metals, averaged over a five-year period.
The resultant average was then adjusted to the nearest lot size for each metal in order to provide practical trading sizes for each of the underlying metals so as to allow for efficient arbitrage and off-setting.
The table below shows the contract’s current weighting.
| |
Weighting to Nearest No. of Lots |
Weighting in Tonnage |
Volume Weighting (%) |
Revised Weighting 01/07/99 |
Value Weighting (%) as at 09/05/02 |
| Aluminium |
25 |
625 |
41.8 |
39.8 |
42.8 |
| Copper |
20 |
500 |
33.4 |
35.5 |
31.2 |
| Lead |
5 |
125 |
8.4 |
2.4 |
8.2 |
| Nickel |
5 |
30 |
2.0 |
9.5 |
2.0 |
| Tin |
3 |
15 |
1.0 |
3.5 |
1.0 |
| Zinc |
8 |
200 |
13.4 |
9.3 |
14.8 |
| Total |
66 |
1495 |
100.0 |
100.0 |
100.0 |
LMEX Futures Contract Specification
| Contract size |
$10 per index point |
| Initial LMEX Value |
1000 points |
| Index point value basis |
Average of the third Wednesday prices for the first three trading months |
| Maturity months |
Monthly for 12 months |
| Last Trading day and time |
17:00 (London time) second Wednesday of the settlement month |
| Settlement basis |
Cash settlement based on the index value at close of last trading day |
| Cash Settlement |
Day following the last trading day |
| Quotation |
Index points |
| Minimum price movement |
0.1 index point |
| Clearing |
Cash clearing through London Clearing House with margin offset to underlying metals where applicable |
LMEX Options Contract Specification
| Contract size |
$10 per index point |
| Last Trading day and time |
16:35 (London time) second Wednesday of the settlement month |
| Exercise day & time |
Automatic for in the money options at approximately 19:15 (London time) on second Wednesday of the settlement month |
| Settlement basis |
Cash settlement based on the index value |
| Cash settlement |
Second Wednesday of the month |
| Maturity months |
Monthly contracts for 3 months |
| Option style |
European |
| Minimum price move (tick size) |
$0.01 |
| Strike gradation |
10 index points |
Access the special contract rules for metals using the LME online rulebook.
LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are permitted to solicit and accept money from foreign futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
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