LME delays plastics futures contracts launch to May '05

21 July 2004 18:07  [Source: ICIS news]

LONDON (CNI)--Plans by the London Metal Exchange (LME) to launch trading in two plastics futures contracts have been delayed by about five months to May 2005, the exchange announced on Wednesday..

The LME expressed disappointment at having to postpone the introduction of polyethylene (PE) and polypropylene (PP) contracts which had widely been expected to be launched in December this year.

The complexity of the contracts has tested LME systems to the full and the exchange relies also on third parties to upgrade their systems to coincide with the launch but that does not now look possible until well into 2005.

The LME confirmed the launch date for the commencement of trading of the two plastics contracts as 27 May.

"The date is the result of detailed project planning and reflects the contribution of a number of third parties whose involvement, as planned, is vital," it said in a statement.

"We are fully committed to the plastics futures contracts and we wanted to give a clear date so that the plastics industry could know when to expect the commencement of trading," LME chief executive Simon Heal said.

"With many years' experience in delivering risk management services to industry, the LME is ideally positioned to provide the plastics industry with an effective and robust environment in which to manage price risk volatility within the plastics supply chain," he added.

On announcing the delay, the exchange asked members to comment on position limits to the plastics contracts - for (PP) and linear low density polyethylene (lldPE).

The exchange believes that the characteristics of the new contracts make current techniques for regulating dominant positions inappropriate. Metals contracts traded on the exchange are settled daily but settlements on the plastics contracts will be monthly. The LME said in its consultation document  that the monthly, as opposed to daily, system means that borrowing by "shorts" is unlikely to relieve the pressure of a dominant long position in the same way that it does for the metals markets.

The LME is asking member companies to comment by 1 September on its proposals to regulate the contracts.

By: Nigel Davis
+44 20 8652 3214

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