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 Ring trading is so called because the LME uses a "ring" with the traders sitting at fixed points around the circle. Trading takes place throughout the day with each LME contract traded in specific five minute periods known as "rings".
The LME system of fixed points clearly helps with the identification of the firms trading, but it is only feasible because the Exchange has a small number of members permitted to take part in ring trading. At present there are 12 “ring dealers”, and all business which is required to be dealt “across the floor” must be passed through a ring dealing member.
A significant proportion of all LME contracts are traded in the ring sessions, including the kerb, or as a result of that trading. The balance goes through the inter-office telephone market and LME Select.
The ring sessions, and especially the second morning rings from which official prices emerge, concentrate liquidity because the physical trade requires prices as close as possible to the daily and monthly settlement prices. This concentration of liquidity ensures both transparency of pricing, and more representative prices than may be obtained through inter-office trading.
The ring itself is about 6m in diameter, with two large display boards above it showing the official prices. There is a special booth where the Exchange’s staff monitor the prices and input bids, offers, spreads and trades made into a computer system. This is instantly sent to the various news vendor services, who display LME prices. Behind each firm’s ring seat is a place for assistants to stand in order to pass orders into the ring and to give commentaries to customers about current market conditions.
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