Explore the Archive

Contact: Andrea Schlaepfer / Rachael Harper, Corporate Communications + 44 (0) 207 426 7463 /7175

LCH.Clearnet set to clear minor metals on the LME

London, 19 January 2010

LCH.Clearnet Limited (LCH.Clearnet), the leading independent clearing house, will begin clearing minor metals for the London Metal Exchange (LME), the world's premier metals and industrial materials exchange, on 22 February 2010.

LCH.Clearnet will provide clearing services for futures contracts traded on the LME in cobalt and molybdenum. The initiative will bring greater risk protection to the minor metals market, increasing transparency and liquidity, providing anonymous post-trade processing and allowing market participants to effectively manage their counterparty exposure.

Cobalt and molybdenum are both key industry metals. Molybdenum production is around 190,000 tonnes a year, with a value of $4.8 billion, while cobalt weighs in at 55,000 tonnes and around $1.9 billion. 

David Farrar, Director of Commodities and Metals, LCH.Clearnet said: “We are proud to be working with the LME on this new initiative.  Cobalt and molybdenum are both by-products of metals already cleared at LCH.Clearnet and, as the leading clearer of commodities in Europe, this is a natural extension to the existing clearing services we provide to market participants.”

Martin Abbott, Chief Executive, LME said: “The launch of minor metals contracts on the LME is a major strategic move to broaden our metals portfolio and we are delighted that LCH.Clearnet is partnering with us on this initiative. Cobalt and molybdenum industry participants will benefit from real price discovery, the ability to finance inventories and the ability to hedge their price risk. The connection to LCH.Clearnet provides the market with all the proven advantages of central counterparty clearing.”


About LCH.Clearnet

LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, energy, freight, interbank interest rate swaps and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in. By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times.

LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.

About the London Metal Exchange

The London Metal Exchange is the world's premier base metals market. It offers metals price risk management tools including futures and options contracts for aluminium, copper, tin, nickel, zinc, lead, aluminium alloy and NASAAC, steel billet, plastics and soon cobalt and molybdenum. Last year, the total value of trading was $7.41trillion and the Exchange currently has 5.96m tonnes of material on warrant in 633 storage facilities across 39 locations globally.