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Price discovery is one of the most important functions of the Exchange. The most reliable prices in any market are derived from those where the greatest concentration of trading takes place. While trading can take place at any time on the LME because of its flexibility, the greatest concentration of trading for each contract occurs during the five minute open outcry Ring sessions, especially the second Ring session.
At the end of the second Ring session LME market operations, who monitor Ring trading from the Ring itself, determine the Official prices from the last bid and offer for cash, three months and fifteen months before the bell is sounded to signal the end of the Ring.
These prices become the Official and Settlement prices (the Settlement price is the cash seller's price) so long as they result from trading in the Ring which meets all the LME standards. The Ring prices are highly transparent, and are sent around the world in real time.
The Exchange also determines "Unofficial" prices from the fourth ring in a similar way to the Official prices.They are used as a further benchmark and are helpful where there have been significant price movements between the second ring and close of floor trading.
One further set of prices important to note, are the Closing Prices (Evening Evaluations), derived from the final Kerb session of the day. These are important for market participants as LCH.Clearnet uses them when it determines margin requirements at the close of business. These prices are published as Provisional Evening Evaluations and then confirmed as Final Evening Evaluations.
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