An Introduction to LMEswaps
Catherine Markey, LME Head of Marketing and Education, gives a presentation on how the metals industry can use LMEswaps to hedge against the Monthly Average Settlement Price.

Hedge against the monthly average, in one simple trade

LMEswaps are a new type of contract available for all our non-ferrous metals. They are the first of their type in the world to be traded on-exchange and are designed specifically for members of the metal community who need to hedge against the monthly average price.

Tradable on LMEselect and the 24 hour telephone market, LMEswaps enable participants to enter into a fixed price and settle the difference against the floating price (the Monthly Average Settlement Price or MASP) at the end of the averaging period – all in one simple trade.

And because LMEswaps are traded on exchange, pre and post-trade prices are transparent, trading is regulated and participants benefit from the counterparty protection associated with contracts traded on exchange – namely default protection and member-to-member counterparty
risk elimination via LCH clearing.

	“Globally, many non-ferrous metals transactions are conducted with reference to a Quotational Period based on a monthly average of LME settlement prices. LMEswaps, the LME’s new facility for trading and clearing swaps based on these monthly averages not only simplifies hedging, but also provides greater transparency to the market by bringing visibility to the turnover and valuations of these contracts.” Dr. Mo Ahmadzadeh, Senior Vice President at INTL Commodities, a subsidiary of INTL FCStone Inc

For further information, please contact us.