BM&FBOVESPA has adopted the London Metal Exchange (LME) prices as its reference
BM&FBOVESPA has adopted the London Metal Exchange (LME) prices as its reference for the settlement of forward non-ferrous metal contracts and flexible call and put options on non-ferrous metal contracts
The objective of this decision is to facilitate hedging transactions by companies that are subject to the fluctuation of metals prices
São Paulo, September 14, 2009 - Since August 28, 2009, BM&FBOVESPA has been using the official prices of the London Metal Exchange (LME) as the reference for the calculation of the settlement value of the forward non-ferrous metal contracts traded at BM&FBOVESPA, and for the settlement of flexible call and put options on non-ferrous metal contracts traded in the BM&FBOVESPA OTC market. Previously, the reference prices for these contracts were calculated by BM&FBOVESPA based on the prices provided by a pool of Brazilian market participants.
The decision is based on a price licensing agreement signed earlier this year between BM&FBOVESPA and the London-based metals exchange LME. The central objective is to meet the demands of both the companies in the metal sector and the financial institutions that provide financing to this sector. LME is the main price reference for transactions involving these types of metals, and by using the LME prices as the reference for the calculation of the settlement value of OTC contracts, BM&FBOVESPA will facilitate access to the hedging strategies which have been developed by companies that operate in Brazil and seek protection against price fluctuations of non-ferrous metals through derivatives contracts.
The flexible options on non-ferrous metal contracts can be settled by using the “spot metal price” or the monthly “average metal price” utilized by the LME. In the event that the parties opt for the “spot metal price” alternative, BM&FBOVESPA will use the price corresponding to the first business day preceding the contract’s expiration date. If the parties opt for the “average metal price” alternative, BM&FBOVESPA will use the arithmetic average price for the metal, taking as a reference the price quotations corresponding to the days on which LME trading sessions were held in the first month preceding the contract’s expiration date.
BM&FBOVESPA offers OTC forward metal contracts and flexible call and put options on metal contracts based on the following non-ferrous metals: aluminum, lead, copper, tin, nickel and zinc. Further information regarding the characteristics of these contracts can be obtained from the web site at www.bmfbovespa.com.br, under the heading BM&F Markets.