Introduction of Clearing of Polypropylene and Linear Low Density Polyethylene Regional Contracts and Additional Prompt Dates for the existing LL and PP Plastics Contracts on the London Metal Exchange

Introduction

The London Metal Exchange Limited (LME) and LCH.Clearnet Ltd (LCH.Clearnet) are currently preparing for the launch of Polypropylene and Linear Low Density Polyethylene regional plastics contracts based in Europe, Asia and North America. This circular provides information about the new contracts, and includes:

• Launch Information
• Systems used for Trade Matching and Clearing
• Regional Plastics Contract Codes
• Trade Suspension
• Clearing Procedures
• PPS and Banking Procedures
• Margin Methodology
• London SPAN Parameters
• PC Bridge and PC LPRS
• PC SWORD
• Fees
• LCH General Regulations and Procedures
• LME Systems User Guide
• Training
  

Launch Information

The launch of the new regional plastics contracts and the additional prompt dates for the existing plastics contracts will take place on Monday, 25th June 2007. Trades can be input to trading and matching systems on this day.

Systems used for Trade Capture, Matching and Clearing

Trade capture, matching and clearing of the new regional plastics contracts will utilise the MCS in the same way as LME metals contracts.

Regional Plastics Contract Codes

Trade Suspension

The traded price and lot size of regional plastics trades presented to LCH.Clearnet for registration are validated against a price range and lots limit file. The lots limit is presently set at 1500 futures lots for all contracts. The price limit is set to be identical to the prevailing scanning range for each contract.

Clearing Procedures

These contracts will be processed by MCS in the same way as existing LME metals contracts.

PPS and Banking Procedures

Standard LCH.Clearnet PPS and banking procedures will apply to these contracts. If you have any queries regarding PPS arrangements please contact Siobhan White on +44 (0)20 7426 7044 or siobhan.white@lchclearnet.com

Margin Methodology

Contracts will be margined using London SPAN in the same way as all other LME contracts. Details of all margin obligations will be included in the same MCS reports as for all existing products. Also all margins will be posted to the LCH.Clearnet Banking system and details will be included in all the usual Banking reports and screens.

London SPAN Parameters

LCH.Clearnet will publish margin rates for the new contracts in a separate circular. Details will be found under the ‘Risk Management’ / ‘Ltd’ section.

PC Bridge and PC LPRS

The versions of PC Bridge and PC LPRS currently in use should continue to be used for plastics implementation.

PC SWORD

PC SWORD v4.02-00 has been issued to all users. This must be installed for use on Monday, 25th June 2007. An installation guide involving a connectivity test has been issued separately.

Fees

The data capture, registration and delivery fees for these contracts are the same as for metals, namely:

All fees are per lot per side.

There will be a fee holiday for all these LCH.Clearnet fees from the start of trading on 25th June 2007 until 31st December 2007.

LCH General Regulations, Default Rules, Settlement Finality Regulations and Procedures

Amendments and additions to the LCH.Clearnet General Regulations, Default Rules, Settlement Finality Regulations and Procedures for these new contracts will be available on LCH.Clearnet website in due course, under the section ‘Rules & Regulations, under sub-heading ‘Ltd and ‘Recent and Forthcoming Changes’. A separate circular will be issued advising members of their availability.

LME Systems User Guide

The LME Systems User Guide will be updated to reflect the new regional plastics contracts and the additional prompt dates and can be found on LCH.Clearnet website. 

http://www.lchclearnet.com/markets_and_services/exchange_and_commodity_derivatives/
lme/lme_systems_user_guide.asp

Training

LCH.Clearnet run a number of courses and workshops including ‘Clearing for the LME course’ and ‘SWORD workshop’. These will be adapted to include the new regional plastics contracts.  If you wish to discuss training requirements please contact Jane Cleaves on +44 (0)20 7426 7078 or jane.cleaves@lchclearnet.com.

Miscellaneous

Questions relating to the topics covered in this circular should be directed to the following:

Yours sincerely

David Farrar
Senior Exchange Relationship Manager
Commercial Services