The London Metal Exchange has seven categories of membership for the Base service, three categories of membership for the LMEprecious service, and two categories of memberships for Registered Intermediating Brokers (RIBs), each with its own criteria and capabilities.
If you are a firm looking to become a member of the LME, we would encourage you to familiarise yourself with the different categories of membership and the benefits they may afford you and your clients. The Market Access team are happy to discuss the benefits and requirements with interested parties wishing to explore LME membership.
Membership applicants must complete certain steps which include: the submission of an application pack, gaining connectivity to the LME Network (as applicable), undertaking system testing and demonstrating operational readiness. Membership applications are approved by the LME Executive Committee.
The Market Access team is available to hold exploratory discussions on all aspects of LME membership and can guide applicants through the process of becoming an LME member from inception to go-live. The Market Access team is also available to provide an advisory service to new and existing members and clients in their operational interaction with the LME.
Core LME & LME Clear Systems
The LME operates three trading venues, an electronic trading platform (LMEselect), an open outcry trading floor referred to as the Ring, and the inter-office or Telephone Market.
Trading & Matching
The electronic trading platform is called LMEselect. Orders may be placed into the central order book via the LMEselect GUI or via the LMEselect FIX API. Trades executed in LMEselect are automatically transmitted to the LME matching system, LMEsmart, and then into the clearing system, LMEmercury, operated by LME Clear. Trades executed in the Ring or in the Telephone market are entered into LMEsmart using the LMEsmart GUI or the FIX member interface and are then automatically transmitted to LMEmercury for clearing. LMEselect is not a mandatory LME system but LME members generally opt to utilise the LMEselect GUI and the FIX member interface in order to execute LME Contracts electronically and to offer their clients an electronic order-routing service.
LMEsword is the LME’s warrant management system. Warrants are issued by LME-approved warehouses and are bearer documents entitling the holder to receive delivery of a specific parcel of metal at a specified warehouse. LMEsword allows for the lodging of warrants with the Depository and the transfer of warrants between account holders. When an LME Contract goes to delivery, the seller will deliver a warrant to LME Clear via the LMEsword system and receive cash in return. Conversely, the buyer will receive a warrant from LME Clear into their LMEsword account via a random allocation process and make payment to LME Clear.
Category 1, 2, 3 and 4 members are required to report all warrant holdings, LME positions for house and client accounts and open interest as at the close of business each day. These reports must be made electronically the following morning via the LME’s Daily Position Reporting System, LMEdprs.
Systems Access Options - Base Metals
|System||Cat 1||Cat 2||Cat 3||Cat 41||Cat 5|
|LMEsmart||Post-Trade Matching & Registration||R||R||R||O||N|
|LMEmercury||Clearing & Risk Management||R||R||R||N||N|
|DPRS||Daily Position Reporting||R||R||R||O||N|
1Category 4 Members are non-clearing members and may choose to outsource post-trade and reporting activities to their Nominated Clearer
Systems Access Options - LMEprecious
|LMEsmart||Post-Trade Matching & Registration||R||R||O|
|LMEmercury||Clearing & Risk Management||R||R||N|
|DPRS||Daily Position Reporting||R||R||O|
2 NCM's may choose to outsource post-trade and reporting activities to their Nominated Clearer
Connectivity to core LME and LME Clear systems can be achieved via leased line connectivity to LMEnet, via an approved Independent Software Vendor (ISV), or via proximity hosting in the LME’s Community Data Centre’s (CDC) in InterXion. LMEnet connectivity provides access to all LME systems. Category 1, 2, 3, and 4 members who are accessing systems directly need to ensure their chosen solution provides connectivity to all required systems, or that they put in place arrangements to outsource any other required system access to another LME member.
|LMEsmart||Post-Trade Matching & Registration||Y||Y||V|
|LMEmercury||Clearing & Risk Management||Y||Y||V|
|DPRS||Daily Position Reporting||Y||Y||V|
|N||Does not provide access|
|V||Varies from provider to provider
Requirement to hold B Shares in LME Holdings Limited
Candidates are required to comply with a number of financial and regulatory criteria and hold a minimum shareholding of B shares in LME Holdings Limited, as set out in the table below.
|Base category||B share requirement|
|LMEprecious category||B share requirement1|
|RIBS category||B share requirement2|
1 Existing members of the Base Service are not required to own additional B Shares unless the B Share quantity owned is less than the minimum B Share holding requirement for the intended category of LMEprecious membership.
2Existing members of the Base or LMEprecious service are not required to own additional B Shares unless the B Share quantity owned is less than the minimum B Share holding requirement for the intended category of RIB membership.
Process for Acquiring B Shares in LME Holdings Limited
Candidates must source the minimum number of B Shares for the Category of membership they are applying for from existing B Shareholders in order to satisfy the membership requirements. Candidates are invited to enter into bi-lateral discussions with holders of excess B shares set out in the schedule.
In the event that a Candidate has exhausted all lines of enquiry and cannot acquire B Shares, LME Holdings Limited, in accordance with the B Share Scheme, can issue the requisite number of B Shares to a candidate in order to satisfy this membership requirement. Further information can be obtained by contacting the Market Access Team.
The B Share sub-committee last convened on 23 June 2014, and after taking into account all relevant factors, it resolved to set the price at which LME Holdings Limited will issue B Shares (if required) to £72 per B Share. This price will be in respect of issues of B Shares made between 24 June 2014 and 19 September 2014. For issues after this date, the B Share sub-committee will determine whether to maintain this price or change it.
Regulatory Requirements - LME Base members (Categories 1 - 4) , LMEprecious members and RIBs must be regulated by the UK Financial Conduct Authority, a competent authority of an EEA State or benefit from an exclusion under the Financial Services and Markets Act 2000 (Regulated Activities) Order (“RAO”).
Members wishing to issue LME registered client contracts to customers will need to demonstrate applicable regulatory authorisations.