The London Metal Exchange (LME) will introduce financially settled swaps for all non-ferrous contracts on 23 January 2012. The average-price contracts are the first of their type to be traded on-exchange in the world and are designed specifically for participants of the physical industry who need to hedge the monthly average price.

“LME swaps will bring transparency to pre- and post-trade prices,” says Chris Evans, Head of Business Development at the LME. “For the first time swaps users will benefit from a regulated market with the same counter-party default risk protection offered by regular futures contracts”.
 
Tradable on LMEselect and the 24-hour telephone market, LME swaps enable physical market participants to enter into a fixed price and settle against an unknown floating price (the Monthly Average Settlement Price or MASP) at the end of the averaging period – all in one simple trade.