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The long journey – the launch of a commodity

futures contract

Simon Heale, Chief Executive, LME

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• Two plastics futures contracts launched on 27 May 2005– Polypropylene (PP)– Linear Low Density Polyethylene (LL)

Establishing a new contract

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• The LME dominates base metals

• So contracts must be commodity related

• New contracts should not be traded on any other exchange

Principles of contract design

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• No competition on any other exchage

• Similarities to metals– market size– market value– shared end-consumers

• Industry need– endemic volatility

• Future potential contracts can be added

Why plastics ?

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• What is the intended constituency?

• Comparing LME and COMEX Copper

• The value of the LME global warehousing network

• Advantages of a global contract

The global dimension

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• A international benchmark specification

• Appropriate date system

• Contracts designed for industry and with industry input

• Trading mechanisms

Defining the contract

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• Trusted mechanism

• Important feature of an LME contract

• Approved warehouse locations

• Approved brands

Delivery

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• Aim to create understanding

• Member involvement vital

• Press activity consistent and constant

• Programme of international conferences and road shows

Marketing

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• The LME Plastics committee – industry involvement

• Vital to the success of development and launch

• Need to embrace people, processes and IT:– professionals in the industry – members organisations at all levels– the clearing house

Partnerships

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• Manage expectations

• It will take time

• But…

Challenges

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• Manage expectations

• It will take time

• But…

• …it will be successful!

Challenges

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The long journey – the launch of a commodity

futures contract

Simon Heale, Chief Executive, LME