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LMEminis are traded electronically on LMEselect, from 01:00 to 19:00 hours (London time) on LME trading days, and on the 24 hour telephone market.
LMEmini contracts are cash-settled and not physically deliverable.
The settlement price for expiring contracts is the parent contract LME Official Settlement Price (cash sellers') established on the cash day for the Third Wednesday prompt of the expiring month.
LMEminis will appeal to market participants who wish to trade monthly contracts that are not physically deliverable, with smaller tonnages, via an electronic trading platform or the telephone market.
Such interested parties would be: LME members, hedge funds, CTAs, arcades, Independent Software Vendors (ISVs), proprietary houses, retail investors, day traders, small professional traders, large professional traders and funds.
LMEminis will also be attractive to the physical metals industry, particularly those looking to trade smaller tonnages than the standard LME contracts or a simple monthly prompt date system.
LMEmini contracts are margined on a daily marked-to-market basis. The closing price for the relevant parent contract is used for calculating margins. As with the existing contracts, LMEminis are cleared by LCH.Clearnet.
LMEminis can be traded via LMEselect by members, and clients of members can trade through a member’s order routing system, or via the telephone.
LMEminis are monthly contracts for one prompt date (the Third Wednesday of every month) per month for 12 months forward. They are traded in smaller lot sizes than existing LME contracts and are cash-settled and therefore not physically deliverable. In contrast to other LME contracts, LMEminis are only tradable on LMEselect and the telephone market.
LME does not have its own clearing house and initial margins are set by LCH.Clearnet in agreement with LME. LCH.Clearnet uses London SPAN methodology for its margining. An LME member may, however, charge a different initial margin to its clients than LCH.Clearnet requires from its members.
If a member or client wishes to calculate London SPAN margins, LCH.Clearnet risk parameter files may be downloaded from LCH.Clearnet website. London SPAN can be programmed into members' systems, or alternatively PC London SPAN, a specially designed PC software program can be used to work out the calculations. More details of PC London SPAN are available on the LCH.Clearnet website: http://www.lch.com/services/technology/pcspan.asp.
Click here to download working examples of LMEmini initial margining.
For LME parent metal contracts, profits are not immediately realised but become due only on the prompt date of the contracts, and discounted to present value, whilst unrealised losses have to paid up or covered by collateral or bank guarantee each day whilst the LME parent metal contract positions are open.
For LMEmini contracts, variation margins are realised each day unlike the parent metal contracts. Daily variation margin payments and receipts are debited or credited to the clearing members' accounts at LCH.Clearnet during the life of the open LMEmini position. The LMEmini variation margins are therefore not discounted.
Click here to download working examples of LMEmini initial margining.
LCH.Clearnet will allow an amount of inter-commodity credit between the LME parent contract and the LMEmini spreads. This credit will reduce the initial margin for both contracts. Please refer to Portfolio 3b note 3 in the working examples of LMEmini initial margining download.
Click here to download working examples of LMEmini initial margining.
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