The London Metal Exchange (LME) is introducing trade-at-settlement (TAS) functionality on LMEselect for 3-month LME Nickel Closing Prices on 18 February 2019.
Designed to initially coincide with the electronic Closing Price trial (beginning 18 March 2019), the functionality will enable LMEselect participants to buy or sell nickel at (or near to) the Closing Price before the Closing Price is discovered.
Participants will be able to use a TAS order book on LMEselect to enter an order to buy or sell a contract (during the course of the trading day) at a price that is equal to, or a number of $1 ticks above or below, the 3-month Closing Price.
Once the Closing Price is discovered, the TAS order delivers the underlying 3-month nickel future at the Closing Price plus or minus the traded TAS price.
Currently participants wishing to “trade at the close” (i.e. buy or sell at the LME Closing Price), do so via the Ring. During the electronic Closing Price trial for LME Nickel, where prices will be established basis an electronic VWAP, TAS will enable participants to continue this practice via the electronic platform.
LME TAS allows a trader to enter an order to buy or sell a contract (during the course of the trading day) at a price that is equal to, or a number of $1 ticks above or below, the 3-month Closing Price.
|LME Nickel TAS: Specification|
|Price band||Initially, 25 ticks above and below zero|
|Lot size||6 metric tonnes|
|Underlying contract||LME Nickel|
|Trading window||01:00 - 17:02 (when Closing Prices are established on LMEselect)
01.00 - 17.00 (when Closing Prices are established on Ring)
|Fees||$0.50 per lot, per leg, per side|
|Reference price||LME Nickel 3-month Closing Price|
|Settlement type||Into underlying 3-month LME Nickel future|
|Trading venues||LMEselect, inter-office telephone market|
“Trade at settlement” is so called because TAS functionality on other markets allows participants to trade the unknown “settlement price” - the price which determines daily margin. On the LME the price used to determine daily margin, discovered after 16.30, is known as the “Closing Price”, not the “settlement price”
The “LME Official Settlement Price”, discovered between 12.30 and 13.15 on the Ring, on the other hand, is used as a reference price in physical deals.