The LME’s unique date structure supports participants in aligning hedges with physical contracts, enabling positions to be held on specific daily dates up to three months forward.
The LME allows its users to create spreads (referred to as “carries”) which involve the simultaneous purchase and sale of two prompt dates of the same metal. These can be categorised into three main categories: short-dated, medium-dated and long-dated carries. The three categories have different fees, which are set out in the LME Fee Schedule.
Today, the LME defines a short-dated carry as a carry trade where the prompt dates of both legs are within 15 calendar days of the TOM date (ie T+1 to T+16). As set out in the Update on Enhancing Liquidity (Notice 25/082), the LME intends to expand the definition of a short-dated carry to include any carry trade where the prompt dates of both legs are within 15 calendar days of each other and are both within the first 60 calendar days.
The LME intends to introduce the short-dated carry change alongside the introduction of the block trade thresholds (more details on the exact dates will be confirmed via market notice).
Some examples of short-dated carries (before and after the definition change) are illustrated below:
Current definition of short-dated carries
Example 1 is considered a short-dated carry as per the current definition as it is a 4-day carry that falls within TOM+15, with the first prompt date as TOM.
New definition of short-dated carries
Example 1 is a short-dated carry as per the new definition as it is a 7-day carry that falls within TOM+60, with the first prompt date as TOM.
