Introduction of Clearing of Mediterranean and Far East Steel Billet Futures 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 Mediterranean and Far East Steel Billet futures contracts. This circular provides information about the new contracts, and includes:

• Launch Information

• Systems used for Trade Matching and Clearing

• Valid Prompt Dates

• Regional Steel Billet Contract Codes

• Trade Suspension

• Clearing Procedures

• PPS and Banking Procedures

• Margin Methodology

• London SPAN Parameters

• PC Bridge 

• PC LPRS

• PC SWORD

• Fees

• LCH General Regulations and Procedures

• LME Systems User Guide

• Training

Launch Information

The launch of the two new regional steel billet contracts will take place on Monday, 25th February 2008. Trades from LME Select and those originating from telephone deals can be input to the LME Matching and Clearing System (MCS) on this day.

Systems used for Trade Capture, Matching and Clearing

Trade capture, matching and clearing of the new regional steel billet futures contracts will utilise the MCS in the same way as LME non-ferrous and plastics contracts.

Valid Prompt Dates

On Monday 25th February 2008, the first tradable prompt date will be the third Wednesday in August, 20th August 2008, and the last prompt date will be the fifteen-month date, 20th May 2009. At the launch of Ring trading, on Monday 28th April 2008, the first tradable prompt date will be the three-month date, Monday 28th July 2008.

Regional Steel Billet Contract Codes

Trade Suspension

The traded price and lot size of regional steel billet 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 non-ferrous metals and plastics 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

A new release of PC Bridge (V4.4-0) is available which will fix a bug that could prevent access to the Futures Closing Prices Filter maintenance screen. This could only arise when we add additional contracts following the two steel billet contracts and only in the event that users don’t set the filter to retrieve “All Commodities”. This is therefore not a mandatory upgrade.

If you require a PC Bridge V4.4-0 disk please contact LCH.Clearnet Service Desk on 020 7426 7200 or email them at servicedesk@lchclearnet.com.

This release can be used in production from 14th February 2008.

PC LPRS

The versions of PC LPRS currently in use should continue to be used for steel billet implementation.

PC SWORD

PC SWORD V4.04-00 will be issued to all users before the User test phase on 17th March 2008. If there are changes to PC SWORD following User testing a new version will be sent to users prior to the SWORD upgrade for steel on 28th April 2008. This must be installed for use on Monday, 28th April 2008.

Fees

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

All fees are per lot per side.

LCH.Clearnet 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 (www.lchclearnet.com), under the section ‘Rules & Regulations, under sub-heading ‘Ltd and ‘Recent and Forthcoming Changes’.

LME Systems User Guide

The LME Systems User Guide will be updated to reflect the new regional steel billet futures contracts 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 steel billet futures 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:

David Farrar
Senior Exchange Relationship Manager
Commercial Services