London Metal Exchange. History of origin and functioning

Few people know that the London Metal Exchange is the world's largest market for futures and options contracts, in which metals are the underlying assets. Despite the fact that it is not widely known to the broad masses, financial communities, powerful mining enterprises and large commodity traders highly respect and appreciate this institution.

This London exchange allows you to conclude contracts for a period of 3 to 123 months from the commencement of trade. With its help, you can hedge and trade options for real delivery, as well as hedge risks.

The London Metal Exchange has a long history and has been operating since 1877. At first, only zinc, lead and copper were traded on it. In 1978 aluminum was included in this list, in a year nickel was added. Then tin (1989), aluminum alloys (1992), steel (2008), molybdenum and cobalt (2010) appeared among the proposed metals. The total annual trading volume is approximately 11.6 trillion dollars.

The oldest and most popular way to conclude deals is to hold an open voice auction. This is the central link in pricing. Formation of value occurs for the most liquid periods in a small circle of participants of the exchange through a voice auction between major representatives of consumers and producers. The last price of buyers, sounded before the signal about the end of trading, becomes the official closing price for contracts.

London Metal Exchange operates during the morning and afternoon trading session. During each of them, nine metals are traded in two blocks for 5 minutes per contract. The morning session starts at 11:40 and lasts until 13:10, and the daytime session starts at 14:55 until 16:15. Both have a ten-minute break. The most important for pricing is the 2 nd morning block. After the first and second trading sessions are completed, over-the-counter trades of 45 and 85 minutes begin. Traded options, futures and options Tarot.

Precious metals, contrary to widespread misconception, are not included in the list of goods offered by the London Metal Exchange. Gold and silver are sold on the over-the-counter London market of ingots, while platinum and palladium have their own separate stock exchange.

As a rule, physical supplies of metals do not occur, as many organizations enter into contracts for risk insurance. However, the small part of the contracts that actually leads to supply is very important, as it takes part in price convergence.

The London Metal Exchange licenses and expands the network of warehouses and warehouses in many countries around the world. Warehouse companies must confirm compliance with sufficiently strict criteria for obtaining a license.

Thanks to the trading activity of this exchange, large industrial enterprises have the opportunity to foresee rapid and serious price movements. In addition, it helps determine the future value of metals for many months to come. Due to the high liquidity, the prices of this exchange are recognized by all consumers and producers of metals in every corner of the world.