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UNITED KINGDOM STOCK EXCHANGES:
WHAT IS A COMMODITY EXCHANGE?A commodities exchange is an exchangewhere various commodities and derivatives products
are traded. Most commodity markets across the world trade in agricultural products and
otherraw materials (likewheat,barley,sugar,maize, cotton, cocoa,coffee, milkproducts,pork
bellies,oil, metals, etc.) and contracts based on them. These contracts can include spot
prices,forwards,futures and optionson futures. Other sophisticated products may
include interest rates, environmental instruments ,swaps, or ocean freight contracts.
Commodities exchanges usually trade futures contracts on commodities, such as trading
contracts to receive something, say corn, in a certain month. A farmer raising corn can sell a
future contract on his corn, which will not be harvested for several months, and guarantee the
price he will be paid when he delivers; a breakfast cereal producer buys the contract now and
guarantees the price will not go up when it is delivered. This protects the farmer from price drops
and the buyer from price rises.
HISTORY OR FUTURES:
Futures contracts for agricultural commodities have been traded for more than 100 years and
have been under Federal regulation since the 1920s. In the last 20 years, futures trading has
expanded rapidly into many new markets, beyond the domain of traditional physical and
agricultural commodities. Futures and options now are offered on many energy commodities
such as crude oil, gasoline heating, oil, and natural gas, as well as on a vast array of financial
instruments, including foreign currencies, U.S. and foreign government securities, and U.S. and
foreign stock indices. In recent years, new futures contracts have been offered in non-traditional
commodity areas such as electricity, seafood, dairy products, crop yields, and weather
derivatives.
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LONDON INTERNATIONAL FUTURES & OPTIONSEXCHANGE:
INTRODUCTION:
The London International Financial Futures and Options Exchange (LIFFE) is the
worlds largest electronic exchange by value of financial, equity and non-financial (commodity)
products.
As the popularity of LIFFE contracts grows accordingly and an increasing number of
users are turning to historical data to track trends, perform technical and quantitative analysis and
to build and utilise trading models. The analysis of complete tick by tick data, detailing every
bid, offer and trade, time stamped, brings market participants a wealth of information about the
behaviour of financial prices and new perspectives in the field of risk management and
forecasting.
LIFFE' s PRODUCTS:
LIFFE offers the most extensive range of derivative products of any exchange in the
world. LIFFE provides futures and options contracts across five different currencies and product
lines: bonds, short terms interest rates, swaps, equities and equity indices, and non-financials
(commodities). LIFFE continually reviews its products to determine what enhancements can be
made to existing products and what new products could be introduced.
LIFFE' s products are supported by additional trading facilities that meet the particularneeds of the market. For example, inter contract spread, basis, block, Flex trading facilities and
against actual.
BOND PRODUCTS:
Futures and option contracts, especially those with the liquidity offered at LIFFE, have
helped to pave the path of globalisation.
For investors, futures and options markets have offered a tool for hedging the interest rate
risk of holding government securities. As these risks are reduced, the incentive to invest outside
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ones own country is enhanced. For dealers, futures and option markets offer an effective tool for
managing stocks of government securities. With reduced dealing risk these firms are freed to
become more active, offering tighter pricing spreads and increased liquidity in the cash markets.
There is evidence that the existence of futures and options markets has had the effect of reducing
the cost of funding debt for the governments involved.
NON-FINANCIAL PRODUCTS:
LIFFE lists a range of contracts covering soft and agricultural products. These contracts,
covering both futures and options, offer an effective and efficient tool for hedging the price risk
and volatility inherent in the underlying markets, providing price transparency as well as creating
the benchmark for physical market transactions. In recent years commodities have also
increasingly been recognised as an important part of an investment portfolio, leading to an
increase in the use of such products by managed funds and institutional investors as well as by
short-term investors.
All LIFFE's Non-Financial Products have been traded on LIFFE CONNECT since 27
November 2000, giving market customers the ability to take advantage of unparalleled trading
technology and potential global access.
Non-Financial Products
Cocoa, Cocoa Future, Option on Cocoa Future
Coffee, Robusta Coffee Future, Option on Robusta Coffee Future
Wheat, Wheat Future, Option on Wheat Future
Barley, Potato Future
Cocoa Future
Unit of trading 10 tonnes
Delivery months March, May, July, September, December, such that ten delivery
months are available for trading
Delivery units1 Standard Delivery Unit bagged cocoa with a nominal net
weight of 10 tonnes
Large Delivery Unit bagged cocoa with a nominal net weight of
100 tonnesBulk Delivery Unit loose cocoa with a nominal net weight of
1000 tonnes
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Last trading day Eleven business days immediately prior to the last business day
of the delivery month at 12.00
Notice day/Tender day The business day immediately following the last trading day
Price basis2 Pounds sterling per tonne in an Exchange Nominated
Warehouse in a Delivery Area which is, in the Boards opinion, in
or sufficiently close to Amsterdam, Antwerp, Bremen, Brighton
and Hove, Dunkirk, Felixstowe, Hamburg, Humberside,
Liverpool, London, Rotterdam or Teeside3
Minimum price 1 per tonne (10)
movement
(Tick size & value)
LIFFE CONNECT 09.30 - 16.50
Trading hours
Origins tenderable Cameroon, Cte dIvoire, Democratic Republic of Congo
(formerly know as Zaire), Equatorial Guinea, Ghana,
Grenada Fine Estates, Jamaica, Nigeria, Sierra Leone, Togo,
Trinidad and Tobago Plantation, Western Samoa at contract
price. All other growths tenderable at set discounts
1 Where necessary upon tender, a seller may be instructed by the Clearing House to convert a
Bulk Delivery Unit into a Large and/or Standard Delivery Units, or a Large Delivery Unit into
Standard Delivery Units.
2 Bulk Delivery Units are tenderable at a discount of 20 per tonne to the contract price.
3 Contact the Exchange to determine which Delivery Areas have Dual Capacity Warehouse
keepers (i.e. those nominated for the storage of Bulk Delivery Units as well as Standard and
Large Delivery Units).
Unless otherwise indicated, all times are London times.
Option on Cocoa Future
Unit of trading One Cocoa futures contract
Expiry months March, May, July, September, December, such that ten expiry
months are available for trading, subject to the option expiring
before the underlying future
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Expiry day 12.00 on the last trading day of the calendar month
preceding the expiry month
Price basis Pounds sterling per tonne
Minimum price 1 per tonne (10)
movement
(Tick size & value)
LIFFE CONNECT 09.32 - 16.50
Trading hours
Strike price 25 per tonne
increments
Option Price: The contract price is not paid at the time of purchase. Option positions, as withfutures positions, are marked-to-market daily giving rise to positive or negative variation margin
flows. If an option is exercised by the Buyer, the Buyer is required to pay the original contract
price to the Clearing House and the Clearing House will pay the original option price to the
Seller on the following business day. Such payments will be netted against the variation margin
balances of Buyer and Seller by the Clearing House.
Robusta Coffee FutureUnit of trading 5 tonnes
Delivery months January, March, May, July, September, November, such that
seven delivery months are available for trading
Last trading day Last business day of the delivery month at 12.30
Tender period Any business day during the delivery month
Price basis US dollars per tonne in an Exchange Nominated Warehouse in
London and the UK Home Counties, or in a Nominated
Warehouse in, or in the Boards opinion, sufficiently close to
Amsterdam, Antwerp, Barcelona, Bremen, Felixstowe,
Hamburg, Le Havre, Marseilles-Fos, New Orleans, New York,
Rotterdam and Trieste
Minimum price $1 per tonne ($5)
movement
(Tick size & value)
LIFFE CONNECT 09.40 - 16.55
Trading hours
Origins tenderable Angola, Brazilian Conillon, Cameroon, Central African Republic,
Cte dIvoire, Democratic Republic of Congo (formerly known as
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Zaire), Ecuador, Ghana, Guinea, India, Indonesia, Liberia,
Malagasy Republic, Nigeria, Philippines, Sierra Leone,
Tanzania, Thailand, Togo, Trinidad, Uganda and Vietnam
Unless otherwise indicated, all times are London times.
Option on Robusta Coffee Future
Unit of trading One Robusta Coffee futures contract
Expiry months January, March, May, July, September, November, such that
seven expiry months are available for trading, subject to the
option expiring before the underlying future
Expiry day 12.30 on the third Wednesday of the calendar month preceding
the expiry month.
Price basis US dollars per tonne
Minimum price $1 per tonne ($5)
movement
(Tick size & value)
LIFFE CONNECT 09.42 - 16.55
Trading hours
Strike price $50 per tonneincrements
Option Price: The contract price is not paid at the time of purchase. Option positions, as with
futures positions, are marked-to-market daily giving rise to positive or negative variation margin
flows. If an option is exercised by the Buyer, the Buyer is required to pay the original contract
price to the Clearing House and the Clearing House will pay the original option price to the
Seller on the following business day. Such payments will be netted against the variation margin
balances of Buyer and Seller by the Clearing House.
Unless otherwise indicated, all times are London times.
Wheat Future
Unit of trading 100 tonnes
Delivery months January, March, May, July, September, November, such that ten
delivery months are available for trading
Last trading day 23rd calendar day of delivery month (in the case of July
delivery months, the 7th calendar day) at 12.30 (if not a
business day then the first business day immediately
preceding)
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Tender period Except in respect of January delivery, any business day from the
seventh calendar day (if not a business day, then the next
business day following) preceding the first business day of the
delivery month, up to the last trading day of the delivery monthinclusive. For January delivery, earliest tender day shall be the
second business day after Christmas Day
Price basis Pounds sterling and pence per tonne, free delivered to buyers
lorry in bulk, from a registered store in mainland Great Britain
Minimum price 5 pence per tonne (5)
movement
(Tick size & value)
LIFFE CONNECT 10.00 - 16.45
Trading hours
Quality EU origin and of the following standard:
Sound and sweet and in good condition and to contain not
more than 3% heat damage.
Natural weight to be not less than 72.5kg per hectolitre.
Moisture content not to exceed 15%.
Admixture:i. seeds and/or total admixture of farinaceous grain (including wild
oats) and dirt not to exceed 2% of which the dirt content not to
exceed 1%;
ii. ergot or garlic not to exceed 0.001%; and
iii. sprouted wheat not to exceed 8%.
All the above tests to be applied on weight basis
Unless otherwise indicated, all times are London times.
Option on Wheat Future
Unit of trading One Wheat futures contract
Expiry months January, March, May, July, September, November, such that ten expiry
months are available for trading, subject to the option expiring before the
underlying future
Expiry day 16.45 on the second Thursday of the calendar month preceding the
expiry month.
Price basisPounds sterling and pence per tonne
Minimum price 5 pence per tonne (5)
movement
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(Tick size & value)
LIFFE CONNECT 10.02 - 16.45
Trading hours
Strike price 1 per tonne
increments
Option Price: The contract price is not paid at the time of purchase. Option positions, as with
futures positions, are marked-to-market daily giving rise to positive or negative variation margin
flows. If an option is exercised by the Buyer, the Buyer is required to pay the original contract
price to the Clearing House and the Clearing House will pay the original option price to the
Seller on the following business day. Such payments will be netted against the variation margin
balances of Buyer and Seller by the Clearing House.
Unless otherwise indicated, all times are London times.
Barley Future
Unit of trading 100 tonnes
Delivery months January, March, May, September, November, such that six
delivery months are available for trading
Last trading day 23
rd
calendar day of delivery month at 12.30 (if not abusiness day then the first business day immediately
preceding)
Tender period Except in respect of January delivery, any business day from the
seventh calendar day (if not a business day, then the next
business day following) preceding the first business day of the
delivery month, up to the last trading day of the delivery month
inclusive. For January delivery, earliest tender day shall be the
second business day after Christmas Day
Price basis Pounds sterling and pence per tonne, free delivered to buyers
lorry in bulk, from a registered store in mainland Great Britain
Minimum price 5 pence per tonne (5)
movement
(Tick size & value)
LIFFE CONNECT 10.00 - 16.45
Trading hours
Quality EU origin and of the following standard:Sound and sweet and in good condition and to contain not
more than 3% heat damage.
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Natural weight to be not less than 62.5kg per hectolitre.
Moisture content not to exceed 15%.
Admixture:
i. seeds and/or total admixture of farinaceous grain (including wild oats) and
dirt not to exceed 2% of which the dirt content not to exceed 1%; and
ii. sprouted barley not to exceed 8%.
All the above tests to be applied on weight basis
Unless otherwise indicated, all times are London times.
WEEKLY PRICE FLUCTUATION OF WHEAT
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YEARLY DIFFFERENCE IN THE WHEAT PRISES
SPREAD OF COCOA
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VOLUMES OF CONTRACT OF COFFEE THAT ARE TRADED
PRICE OF ROBUSTA COFFEE
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LONDON METAL EXCHANGE
The London Metal Exchange (LME) is the futures exchange with the world's largest market inoptions, andfutures contractsonbase and othermetals. As the LME offers contracts with dailyexpiry dates of up to three months from trade date, along with longer-dated contracts up to 123months, it also allows for cash trading. It offers hedging, worldwide reference pricing, and the
option of physical delivery to settle contracts.
It is located at 56Leadenhall Street in the City of London.
HISTORY
The London Metal Market and Exchange Company was founded in 1877, but the market tracesits origins back to 1571 and the opening of the Royal Exchange, London. Before the exchangewas created, business was conducted by traders in London coffee houses using a makeshift ring
drawn in chalk on the floor.At first onlycopperwas traded. Lead and zincwere soon added but only gained official tradingstatus in 1920. The exchange was closed during World War II and did not re-open until1952.The range Of metals traded was extended to
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include aluminium(1978), nickel (1979),tin (1989), aluminium alloy (1992), steel(2008), andminor metals cobaltandmolybdenum (2010). The exchange ceased tradingplastics in 2011. Thetotal value of the trade is around $US 11.6 trillion annually.
Many deals are made for commodities to be delivered in three months' time.
FEATURES
Transparent pricing
The LME provides a transparent forum for the trading of futurescontracts fornon-ferrous metals,minor metals and steel billet. Asa result of this trading, daily prices are 'discovered' and published
by the Exchange which the physical industry around the world use
as the basis of price negotiations for the physical sale or purchaseof metal.
Risk management tools
Through its trading members, the LME offers those at all stages ofthe industrial raw materials supply chain, including both buyersand sellers, the opportunity to 'hedge' their price risk, and thereforegain protection from future adverse price movements. Hedging inthis way is most efficient when the physical and futurestransactions are made basis the current LME price.
Delivery points of last resort
As a 'market of last resort', the physical non-ferrous metals andsteel industries can use the Exchange's delivery option to sellexcess stock in times of over supply and as a source of material intimes of extreme shortage. The market does not replace the normalchannels for the buying and selling of material and only a verysmall proportion of contracts actually result in delivery. The
presence, or 'threat', of physical delivery plays a vital role increating price convergence between the futures and the physicalmarket.
Warehousing
To support this mechanism the Exchange approves and licensesa network of warehouses and storage facilities around the world.Warehouse companies must meet strict criteria before they areapproved for the handling of metals.
Warehouse Minimum Loading Out Rates
On 27 May 2011 the LME issued a notice regarding warehouse
minimum loading out rates for the Board of the LME to considerat their meeting on 16 June 2011.
Warehouse Locations
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LME approved delivery locations are typically located in areas ofhigh consumption and are logisitical trading hubs for the shipmentof material.The LME has a formal policy and guidelines on the selection of
new delivery points.
TRADING PROCESS
The LME provides the flexibility of three trading platforms; whichoperate side-by-side:
Ring trading
1145 to 1700 hours, London TimeOpen-outcry is the oldest and most popular way of trading on theExchange. It is central to the process of price discovery, a termused to describe the way LME official prices are established. These
prices are derived from the most liquid periods of trading; the shortopen-outcry ring trading sessions, and are most representative ofindustry supply and demand. The official settlement price, on whichcontracts are settled, is determined by the last offer price before the
bell is sounded to mark the end of the official ring.
LME select
LMEselect is the official Exchange-operated electronic trading platform.LME member firms are connected to the LMEselect system which allowsaccredited traders to execute trades electronically. It allows for straight-through processing in which LMEselect trades are automatically sent tothe matching and clearing systems operated by LCH.Clearnet.
The system also enables LME members to connect their clients directlyto the LMEselect trading system via third party applications, a processknown as order-routing.
Telephone trading24 hours a dayThe Exchange also supports an inter-office telephone market
between LME members which operates 24 hours a day.
TRADING VOLUME
The London Metal Exchange is the world centre for the trading of industrial metals more than80% of all non-ferrous metal futures business is transacted on our platforms. In 2011 thisequated to:
$15.4 trillion notional
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3.5 billion tonnes
146 million lots
record open interest of 3 million lots.
TRADING TIMEInter-office telephone trading - available 24 hours a day.LME Select - available from 01.00 - 19.00 (London time).Ring trading - available from 11.40 - 17.00 (London time).
LME CONTRACTS
The LME's forward contracts allow producers, fabricators, merchants and consumers to insure
against price risk.
The LME also offers traded options contracts based on each of these futures contracts, togetherwith traded average price options contracts (TAPOs) based on the monthly average settlement
price (MASP) for all metals futures contracts.
All LME prices are quoted in US Dollars, but the LME permits contracts in sterling, Japaneseyen, and Euros and provides official exchange rates from US Dollars for each of them.
Trade is conducted in lots rather than tonnes, with each lot of aluminium, copper, lead and zincamounting to 25 tonnes. Nickel is traded in 6 tonne lots, tin in 5 tonnes and aluminium alloy and
NASAAC in 20 tonne lots. PP and LL are traded in 24.75 tonne lots.
The contract for each metal sets out the shapes, weights and methods of strapping (metals) andpackaging (plastics). The contract specifications are for the quality and shape which are mostwidely traded and demanded by industry.
Futures
Futures contracts are purchases or sales of goods for a specified delivery date in the future atprices established today.
Options
Option contracts give trade hedgers and investors a flexible alternative to futures as a means oftrading on the Exchange.
TAPOsTAPO's are Exchange cleared contracts based on the LME Monthly Average Settlement Price(MASP).
LME Aluminium futures contract specification
Delivery/settlement datesFirst prompt date is TOM which is the next business day from today
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The Cash prompt date is two business days from today followed by otherdaily prompts up to three monthsTOM, CASH and 3 MONTH prompt rolls on a daily basisWeekly prompts on every Wednesday of the month from 3 months to 6
monthsMonthly prompts on every third Wednesday from 7 months to 123 months
Quotation
US DOLLAR PER TONNE .Clearing CurrenciesDollar, euro , yen .
\
Ring Trading TimingsFirst Session
1st Ring11:55 12:00
2nd Ring(Official)
12:55 13:00
KerbTrading*
13:20 14:45
Second Session
1stRing
15:15 15:20
2nd Ring 15:55 16:00Kerb Trading 16:15 17:00
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LME Copper Futures Contract Specification
Delivery/settlement datesFirst prompt date is TOM which is the next business day from todayThe Cash prompt date is two business days from today followed by other daily promptsup to three monthsTOM, CASH and 3 MONTH prompt rolls on a daily basisWeekly prompts on every Wednesday of the month from 3 months to 6 monthsMonthly prompts on every third Wednesday from 7 months to 123 months
QuotationUS DOLLAR PER Tone
Clearing currenciesUS dollar, Japanese yen, sterling, euroRing Trading TimingsFirst Session
1st Ring12:00 12:05
2nd Ring(Official)
12:30 12:35
KerbTrading*
13:20 14:45
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Trading specifications for LME Steel Billet
Deliverydates
Daily from cash to 3 months(first prompt date two
working days from cash) .Then every Wednesday from3 months to 6 months. Thenevery third Wednesday from7 months out to 15 months
Quotation US dollars per tonne
Clearablecurrencies
US dollars
MinimumPriceMovement
Ring - Outright $0.50, Carries$0.01LME select - Outright $0.10,Carries $0.01Inter-office -Outright/Carries $0.01
Contractcode
FM
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1stRing
15:10 15:15
2nd Ring 15:50 15:55
Kerb Trading16:15 16:55
http://www.lme.com/who_how_ringtrading.asphttp://www.lme.com/who_how_select.asphttp://www.lme.com/who_how_interoffice.asphttp://www.lme.com/who_how_ringtrading.asphttp://www.lme.com/who_how_select.asphttp://www.lme.com/who_how_interoffice.asp7/29/2019 UK Stock Exchange-LIFFE
19/20
Steel billet Ring trading timesFirst Session
1st Ring 11:40 11:45
2nd Ring (Official Prices) 13:05 13:10
Kerb Trading* 13:20 14:45
Second Session
1st Ring 15:30 15:35
Kerb Trading 16:15 16:40
LME ATEEL BILLET PRICEs
LME Nickel Futures Contract Specification
Delivery/settlement dates
19 / 20
http://www.lme.com/glossary/glossary_7507.asphttp://www.lme.com/glossary/glossary_7055.asphttp://www.lme.com/glossary/glossary_7507.asphttp://www.lme.com/glossary/glossary_7055.asp7/29/2019 UK Stock Exchange-LIFFE
20/20
First prompt date is TOM which is the next business day from todayThe Cash prompt date is two business days from today followed by other daily promptsup to three monthsTOM, CASH and 3 MONTH prompt rolls on a daily basis
Weekly prompts on every Wednesday of the month from 3 months to 6 monthsMonthly prompts on every third Wednesday from 7 months to 63 months
QuotationUS DOLLAR PER Tone
Clearing currenciesUS dollar, Japanese yen, sterling, euro
LME Nickel Ring trading times
First Session
1st Ring12:15 12:20
2nd Ring(Official)
13:00 13:05
Kerb Trading*13:20 14:45
Second Session
1stRing
15:25 15:30
2nd Ring 16:05 16:10
Kerb Trading 16:15 16:45