The London Metal Exchange (LME) said on Thursday, that it will launch its joint futures contracts on the Singapore Exchange (SGX) on Feb. 15, 2011.

The LME and SGX will launch futures contracts in aluminium, copper and zinc, it said in a statement.

“Investors in Asia clearly value the integrity of LME prices but have told us they want new ways to trade LME metals,” said Martin Abbott, LME chief executive. “The appeal of LME-SGX Metal Futures lies in their small size, their simple monthly dates and settlement linked to the LME's global benchmark prices.”

 

In July, the LME said it was in discussions with the SGX on the prospect of cooperating in Asia. 

 

That same month, Abbott told a news conference in London, that the Exchange was in negotiations with the SGX to set up "mini LME contracts" for early next year.

 

The LME is trying to attract more Asian business after trading volumes jumped 7.5% to more than 59 million lots in the first half of 2010.  

 

“For the first time ever SGX members and customers will be able to gain exposure to the price of base metals via SGX's platform,” Magnus Bocker, chief executive officer of SGX said in the statement. 

 

The statement added that new contracts based on lead, steel, tin and nickel would follow.

 

Traders and analysts have raised doubts about the likely success of new mini contracts, even if they are targeted at the Asian market, given the lacklustre performance of the exchange's existing mini contracts.

 

The LME in December 2006 launched small-size, cash-settled, monthly copper, aluminium and zinc futures contracts, which trade electronically on its Select system.

 

One contract or lot for the existing mini contracts is 5 tonnes. Benchmark copper (CMCU3), aluminium (CMAL3) and zinc (CMZN3) contracts are 25 tonnes. 

 

The minis were meant to attract investors such as hedge funds and commodity trading advisors as well as consumer and producers looking to trade smaller quantities.