1 the long journey – the launch of a commodity futures contract simon heale, chief executive, lme
TRANSCRIPT
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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