Lme Gears Up To Launch New Options

As this year draws to a close we will be displaying indicative prices so that counterparties proposing to enter into what are currently OTC TAPOs contracts should be in a position to bring them onto the exchange once the contracts become official, King said in an interview. TAPOs (traded average price options) are scheduled by the LME for early January 1997 introduction. These are similar to Asian options, which are currently traded over-the-counter (OTC).

King said that the LME is very enthusiastic about TAPOs, which have been the result of a considerable amount of research. The LME currently lists traded option contracts which are for physical delivery if exercised. The perception within the industry is that TAPOs are suited to being brought on the LME.

 

The LME provides transparancy, the benefit of having exchange cleared contracts, and regulatory protection will suit industry participants, King said. Meanwhile, the LME still has South Korea and Taiwan on its agenda as potential delivery points for its metals.

We have to satisfy ourselves as to the appropriateness of those locations from the legal and commercial aspects.

The basic asset they have in their favour is that both locations are significant net consumers of most LME base metals with very little indigenous production and supply, he said. But although they conform to the LMEs prime criteria for listing as warehouse locations, they have been on the agenda for some time and any further progress may not be until the exchange adresses other issues.

At this moment in time there are no other geographical locations that the LME is looking at. It currently has warehouses in Europe, the US, Singapore and Japan.

The possibility of areas of general production, such as Australia, South America and the southern part of Africa are very remote, he said.