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The ring offers the traditional benefits of transparency attached to a physical, open outcry marketplace, but it is only available for a part of the 24 hour working day. A modern financial market needs to be able to service the needs of its customers for all of the working day, if not longer, and so the LME accommodates this by inter-office trading.
This is a system that deals like the foreign exchange, bond or stock markets, but then clears like a ring-traded contract. In other words, people can see an indicative price on a screen as they contact a broker, and then complete a deal there and then.
Brokers continue to provide indicative prices which are available through vendor screens. The actual prices quoted to a prospective client by a broker will not necessarily be identical to the indicative prices, but will depend on the size of the deal, the state of the market, and on the client’s credit rating and relationship with the broker.
If a broker’s quotes are noticeably out of line with the indicative prices on the screen he is likely to lose business. It is in the firm’s own interest to ensure that the prices on the screen are kept up-to-date, especially in fast moving markets.
Transactions done through the inter-office trading system are “real” LME contracts and pass on through the matching, clearing and settlements procedures.
LME members
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