Glossary

Arbitrage With arbitrage, the metal merchant tries to use existing differences in the rate of exchange between various metal stock exchanges, particularly COMEX and LME, to his advantage.
Backwardation Disagio for dated goods. Can be a sign of shortage of effective goods or preferred sales of dated goods.
Bear The Bear expects dropping stock exchange rates and orients his behaviour accordingly.
Brand All metals that are deliverable at the metal stock exchange have to be registered with the committee as a “brand”, recognized as a “good delivery”.
Bonus
  1. Extra charge on certain brands within a specific warehouse, or just for a specific brand or just for a specific warehouse.
  2. The price of an option which is generally paid to the seller immediately after contract conclusion. LME option premiums are quoted in dollars and pounds.
  3. Differences between the prices of various dated months.
Broker First broker with the license for the according stock exchange.
Bull The Bull expects rising stock exchange rates and orients his behaviour accordingly.
Clearing-House All business of stock exchange members are registered and balanced through this independent institution. It is important that the clearing house guarantees the fulfilment of all registered contracts. As a safety measure, margins are demanded for this. LME has been tied to a clearing house since 1987.
COMEX Abbreviation for the New York Commodity Exchange Inc.
Commission The provision charged by the broker for purchase or sale of goods.
Contango Extra charge for dated goods. A sign of sufficient supplies of effective goods or of a higher demand of dated goods, i.e. expresses expectations of shortages in retrospect. Contangos are limited through the costs for stock-keeping and funding
Contracts Stock exchange contracts with broker companies for marketable qualities.
Date Temporary purchase or sale; up to 27 months on the LME (as of September 30, 2002 63 months for copper and aluminium) and 23 months on the COMEX.
Hedge This is, in its simplest form, the sale of dated goods for the purchase of physical goods or vice versa. This is a way to use opposing engagements in order to stop the effect of an unfavourable development in prices on warehouse stock or previous engagements.
LME Abbreviation for "London Metal Exchange".
Long-Position A long-position exists when a sales contract is closed at the metal stock exchange.
Margin The amount a client leaves with his broker in order to protect the broker from losses on his contracts. It must be deducted by brokers to the clearing house since the introduction of the clearing system at the LME (1987).
Official Market Lunch stock exchange, which generally serves as a rule for long-term contracts.
Ring “Ring” is the timeframe of five minutes, in which trades are made on the London stock exchange.
Settlement-annotation The sales-annotation last announced during the “ring” is accepted as a settlement-annotation. The settlement of prolonging operations is based on this settlement-annotation, which is generally based on the brokers.
Short-Position A short-position occurs when a sales contract is closed on the London metal stock exchange.
Stocks Supplies of metal, which are located in a registered warehouse of the London metal stock exchange.
Warehouse The metal stock exchanges LME and COMEX have licensed warehouses worldwide, in which metal can be physically stored.
Warehouse warrant Document which proves the reception of goods – mentioned on a receipt – from a carrier. To be acceptable within the limits of a dated contract, the warehouse warrants must be documented receipts of reception for goods stocked in warehouses recognized for delivery purposes by the stock exchange in which the related dated contracts are being traded.
Warrant Stock exchange warrant for a certain amount of metal in a named stock exchange warehouse (see warehouse warrant). This document is a name certificate.