LME warrants

Previously, physical warrants were issued by warehouses through their London agents. The London agent printed the warrant then the member collected it and deposited it with the depository in a secure vault. The depository then held the warrant (and rights in the underlying metal) on behalf of the account holder in LMEsword.

Under the new electronic warranting structure, the lodgement and withdrawal of warrants now occur electronically, so no paper warrants will need to be taken to the depository by the member. Once lodged, the warrant will now exist in electronic (‘dematerialised’) form.* The LME acts as a depository, holding rights in the warrant and, where relevant, immobilised warrant (as well as rights in the underlying metal) on behalf of the account holder in LMEsword.

For more information on the legal structure, please see LME notice 20/225.

*Except for warrants issued by warehouses in South Korea which are printed, but immobilised, in the depository

The new model means that the member will no longer be required to collect physical warrants from the London agent, create a lodgement instruction or present the warrants to the depository.

The agent now receives an instruction (as they did previously) from the warehouse company to create the warrants. This instruction will be validated by the agent, and as part of the new process a lodgement instruction will be created for the relevant Clearing member.

No, when a member instructs for a withdrawal the London agent will validate and authorise. The 200 warrant cap has also been removed from withdrawals. Once authorised a new print will be triggered for a bearer warrant at the agent and within the LME depository marking the warrant as ‘cancelled’. This means that the LME depository will not be required to physically locate the original print derived from the lodgement. A much more efficient model than the previous service.

Yes, but only upon completion of a withdrawal instruction at the London agent. Therefore we have removed the need for couriers to transfer bearer warrants between the agent, the member and the depository.

The LME can now move away from having physical warrants stored within a secure vault. This means that a number of process improvements can be achieved without upsetting the warrant creation or cancellation process between the warehouse company and their appointed London agent.

No, the agent (outside of LMEsword) will send the Clearing member additional details in relation to the lodgement and a security code. Once the Clearing member enters the security code to LMEsword they will be able to download the warrants information. The member can either approve or reject. If accepted, the warrants will be allocated to the nominated account within LMEsword.

Once the instruction is authorised, a print of the warrant will be created in the LME depository (where required) which has no value outside of the LME.

No, the warrants will be lodged almost immediately for dematerialised jurisdictions, whilst for immobilised jurisdictions this may take slightly longer whilst the Depository Operations team confirm the printing within LME. Instructions are no longer limited to batches of 200, so time to complete will be minutes as opposed to hours.

Yes, although we believe demand for this is low. The new electronic warranting model will require a lodgement followed by a withdrawal to remove a physical bearer document that would be printed by the London Agent. This provides greater control for the Member and a robust audit trail.

No, LMEsword is available 24/7, but only supported between 09.00-18.00 Monday to Friday.

LMEsword

Members who currently require the new operating procedures or technical specification file should send a request to Post Trade Operations.

Please reach out to our Post Trade Operations team or your relationship manager who will be happy to assist.