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Triland > Sugarbowl > Flashcards

Sugarbowl Flashcards

1
Q

What is the chemical symbol for copper?

A

Cu

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2
Q

What are the trading platforms for copper?

A

LME, COMEX, SHFE

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3
Q

What is the average annual production of copper?

A

~21 million tonnes per year

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4
Q

Which countries are the largest producers of copper?

A
  • Chile
  • Peru
  • China
  • US
  • Australia
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5
Q

What are the common uses of copper?

A
  • Electrical wiring
  • Plumbing
  • Telecommunications
  • Renewable energy technologies
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6
Q

What is the closing time for copper ring trading?

A

12:30-35

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7
Q

When does the end of day valuation for copper occur?

A

16:45-50

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8
Q

Who are the biggest companies involved in copper trading?

A
  • Glencore
  • Trafigura
  • Freeport
  • BHP
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9
Q

What factors influence copper prices?

A
  • Global economic conditions
  • Electricity prices
  • Geopolitical events
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10
Q

What was the main event involving Yasuo Hamanaka in 1996?

A

Attempted to corner the copper market by manipulating futures contracts.

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11
Q

What was the financial impact of Yasuo Hamanaka’s actions?

A

$2.6 billion losses for Sumitomo Corp.

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12
Q

What nickname was given to Yasuo Hamanaka?

A

Mr. Copper

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13
Q

What percentage of all LME copper warrants did Hamanaka control at one point?

A

93%

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14
Q

What actions did the CFTC take in response to Hamanaka’s activities?

A

Started to investigate suspicious warehouse movements.

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15
Q

Fill in the blank: The largest warehouse locations in use for copper include _______.

A

Port klang, Kaohsiung, Rotterdam, Gwangyang, Busan, Singapore, Hamburg

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16
Q

True or False: Copper is the most traded metal in the world.

A

True

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17
Q

What were the consequences of Hamanaka’s confession on June 5, 1996?

A

LME revised membership categories and reporting requirements.

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18
Q

What does ALU stand for?

A

Aluminum

Commonly used in various industries.

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19
Q

What are the common industries for ALU?

A

Aviation, automotive, construction, and packaging.

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20
Q

What is the weight of a standard lot in ALU trading?

A

25 Tonnes per Lot.

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21
Q

What are the 2nd ring and end of day times for Alu valutions

A

13:00 (prim.), 12:40 (Alloy), 16:25-30 / 15:55-16:00.

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22
Q

Who are the biggest companies in the ALU market?

A

Glencore, Trafigura, Royce, Gerald.

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23
Q

What influences ALU prices?

A

Global economic conditions, electricity prices, geopolitical events.

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24
Q

What are the main trading platforms for ALU?

A

LME, COMEX (New York Mercantile Exchange), and SHFE (Shanghai Futures Exchange).

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25
Q

Who are the largest producers of ALU?

A

China, India, Russia, Canada, and the US.

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26
Q

What is the annual production of ALU?

A

~ 64 million tonnes per year.

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27
Q

What is NASAAC?

A

North American Special Aluminum Alloy Contract.

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28
Q

What is unique about the LME’s first regionally focused contract?

A

It is based in the automotive industry (GM).

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29
Q

What is the difference between nasaac and standard alloy contracts?

A

Nasaac has different metallurgical specifications from the standard alloy contract.

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30
Q

Where are the warehouses for nasaac and standard contracts located?

A

Nasaac: American warehouses; standard has mostly Italian/EU warehouses.

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31
Q

What is the weight of a lot in Nasaac?

A

20 tonnes in ALot.

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32
Q

What is the composition of ALU alloys?

A

Contains 13.3 - 18.55% of other materials (86.7 - 81.45% ALU).

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33
Q

What additional costs do buyers pay for physical ALU Premium?

A

Factors include transportation, regional supply & demand, and delivery terms.

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34
Q

What were the stock numbers on 31.12?

A

634,650 close, 289,575 warrants.

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35
Q

What are the abbreviations for nickel?

A

NID, NIE, NIS, NIY

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36
Q

What is the standard lot size for nickel trading?

A

6 Tonnes per Lot

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37
Q

What are the 2nd Ring trading hours for nickel?

A

13:00 - 13:05

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38
Q

Who are the biggest companies in the nickel market?

A

Glencore, Trafigura, 3HP, Vale SA

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39
Q

What are the primary uses of nickel?

A

Mostly used in stainless steel production and battery manufacturing (electric vehicles)

Increasing demand

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40
Q

Which countries are major producers of nickel?

A

Indonesia, Philippines, Russia

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41
Q

What is the estimated production of nickel per year?

A

~3.6 million tonnes per year

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42
Q

What factors influence nickel prices?

A

Global economic conditions, technological advancement, government politics

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43
Q

What was the nickel crisis of 2022?

A

Concerns over supply disruptions in Russia due to western sanctions led to a rush to cover short positions, causing prices to rise to $100,000 per tonne.

LME stopped nickel trading and canceled trades due to several companies defaulting on margin calls, resulting in legal battles.

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44
Q

What were the closing stock figures for nickel on December 31?

A

162,474 close, 150,648 warrants

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45
Q

What is the Abbreviation used for Tin?

A

SND/SNE/SNS/SNY

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46
Q

What are the main uses of tin?

A

Used in soldering, plating, tin can production, and food storage.

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47
Q

What industries influence the supply and demand of tin?

A

The electronics and food packaging industries influence supply and demand.

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48
Q

What are the biggest producers of tin?

A

The biggest producers are China, Indonesia, Myanmar, Malaysia, and Brazil.

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49
Q

What is the estimated production of tin?

A

Approximately 290 k tonnes per year.

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50
Q

What was the closing price of tin stocks on December 31?

A

The closing price was 4630.

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51
Q

What is the time for tin 2nd ring & kerb?

A

Trading occurs between 12:40 - 12:45 and 16:05 - 10.

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52
Q

What are some of the biggest companies involved in tin production?

A

Yunnan, Minsur, MSC, and Timah are major companies in tin production.

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53
Q

What does LEAD stand for?

A

PBD, PBE, PBS, PBY

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54
Q

Whatare the biggest lead companies?

A

Glencore, Trafigura, BHP, RI, Nyrstor

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55
Q

What is the typical lot size for lead?

A

25 Tonnes per Lot

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56
Q

What are the key time periods for lead trading? (2nd ring & kerb)

A

12:45 - 12:50 and 16:55 - 17:00

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57
Q

Who are the biggest producers of lead?

A

China, Australia, Russia, US, Peru

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58
Q

What percentage of lead production comes from the top producer and who is it?

A

57%, china

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59
Q

What is the annual production of lead?

A

~11.9 million tonnes per year

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60
Q

What are the stock figures for lead as of 31.12?

A

242200 close

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61
Q

What is the warrant figure for lead in 2025?

A

202525 warrant

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62
Q

What is the main use of zinc?

A

Mainly used in galvanising steel and iron to prevent corrosion, die-casting for automotive & electrical industries, production of alloys (brass), batteries, paints, and medical applications.

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63
Q

What are the biggest producers of zinc?

A

China, Peru, and Australia.

Biggest producer: ~12.3m t.p.y.

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64
Q

What is the ring closing time for zinc?

A

12:50 - 12:55.

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65
Q

What is the end of day valuation time for zinc?

A

16:35 - 40.

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66
Q

What is the stock closing value for zinc on 31.12?

A

234100 close, 171450 warrant.

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67
Q

What are the zinc codes?

A

ZSD, ZSE, ZES, ZSY.

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68
Q

What is the typical lot size for zinc?

A

25 Tonnes per Lot.

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69
Q

Who is the major consumer of zinc?

A

China is both a major producer and consumer.

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70
Q

What is Initial Margin?

A

Initial calculation of risks inherent to a position. Required to open a position.

Covers realised P&L from Trade Date to Default.

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71
Q

What does SPAN stand for?

A

Standard Portfolio Analysis of Risk, which evaluates futures and options to determine worst case loss scenario.

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72
Q

What is Variation Margin?

A

Also known as maintenance margin, it is a daily mark-to-market calculation based on closing price. If there is a fall in value, the margin must be ‘topped up’ through a margin call.

Profit cannot be removed before the prompt date and covers potential future losses.

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73
Q

What is Additional Margin?

A

Accounts for risks outside of SPAN, especially for large or innovative/unusual positions.

Includes net (neg) IM exposure, net VM exposure, and ledger balance.

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74
Q

What are the components of Additional Margin?

A
  1. Concentration AM
  2. Default fund AM
  3. Credit AM
  4. Discretionary AM

Covers potential future losses.

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75
Q

What is Total Margin?

A

The sum of Initial Margin, Variation Margin, and Additional Margin.

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76
Q

What is a margin call?

A

A request to top up the margin when the value falls below the required level.

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77
Q

What is the scanning range example for Copper?

A

Check margin parameters! Published every month. For a client wanting to hedge 20 lots (500 tonnes) of copper, the initial margin required is $317,000 ($634 x 500 tonnes) upfront to open this position.

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78
Q

What is inter-prompt risk?

A

The measure of risk between positions on different dates (or ‘prompts’ in LME parlance).

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79
Q

What does the methodology for inter-prompt risk incorporate?

A

The relationship between spread level and forward volatility.

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80
Q

What are Trading Position Limits (TPL)?

A

TPL is measured against Initial Margin (IM) exposure.

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81
Q

How is Trading Position (TP) defined?

A

Trading Position equals Initial Margin.

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82
Q

What is the formula for Trading Position Limits (TPL)?

A

TPL = IM Credit Line + VM Credit Line.

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83
Q

What does Ledger Balance refer to?

A

Ledger Balance includes Cash Balance.

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84
Q

How can Cash Balance be utilized?

A

Cash Balance can be used against Margins.

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85
Q

What is Net Cash Equity?

A

Net Cash Equity is calculated as the sum of negative IM, UM, outstanding Commission, and Fees.

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86
Q

What is the interest on credit line usage?

A

NCE SOFA + markup interest on credit line usage.

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87
Q

What is the standard MaRK uP?

A

Standard MaRK uP is 150 Basis Points (-1.5%).

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88
Q

What does SoFR stand for?

A

SoFR stands for Secured Overnight Financing Rate.

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89
Q

What is TriX?

A

Trilands own trading platform.

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90
Q

What functionalities does TriX provide?

A

Request quotes, APC, dealers, FX, place trades, futures, averaging, swaps, and ring orders.

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91
Q

What are the operating hours of TriX?

A

From 1 AM to 10 PM.

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92
Q

What is CM2?

A

Also known as ‘The Matrix’, it is an operations trade matching tool.

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93
Q

What does CM2 feed into?

A

LME Select.

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94
Q

What is the purpose of the Order Stack?

A

It is referred to as ‘The bible’ for input and management of orders.

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95
Q

What does Direct Market Access provide?

A

24 hours access to LME live prices.

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96
Q

What is EiKon?

A

It provides financial analysis and data services.

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97
Q

What additional feature does EiKon include?

A

Chatrooms.

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98
Q

What is the main frustration of physical/industrial clients?

A

They feel there is small relevance to the LME ecosystem.

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99
Q

Who are the priorities of the LME focused on?

A

Hedge funds, money managers, CTAs, and speculators.

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100
Q

What is the impact of new block limits on small trades?

A

They are designed to modernize the market but can marginalize smaller (physical) traders.

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101
Q

What is required for small trades under the new limits?

A

Small trades have to be traded on-screen, which means no anonymity.

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102
Q

What is the block trade threshold for LME?

A

10 lots.

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103
Q

What do trading fees vary based on?

A

They vary depending on contract type, ring, etc.

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104
Q

What are clearing fees associated with?

A

They are associated with executing trades through LME Clear.

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105
Q

What does the annual service subscription provide?

A

Access to LME services and data.

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106
Q

What are membership fees related to?

A

They are related to maintaining an account with LME.

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107
Q

What do warehouse fees cover?

A

They cover storing and managing physical metal.

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108
Q

What are OTC booking fees for?

A

They are for booking over-the-counter trades.

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109
Q

What is the Official Settlement?

A

The last cash offer price made in the ring.

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110
Q

What are Official prices?

A

Last bid and offer prices quoted.

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111
Q

What is the significance of Official Settlement prices?

A

They serve as the official reference global for physical contracts.

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112
Q

What is the price at which all LME futures are settled?

A

The Official Settlement price.

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113
Q

What are the Ring Times for Copper?

A

12:30 - 35.

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114
Q

What are the Ring Times for Alloy?

115
Q

What are the Ring Times for Tin?

116
Q

What are the Ring Times for Lead?

117
Q

What are the Ring Times for Zinc?

118
Q

What are the Ring Times for Aluminum?

119
Q

What are the Ring Times for Nickel?

A

13:00 - 05.

120
Q

What are the Kerb times for Cobalt?

A

15:50 - 55.

121
Q

What are the Kerb times for Alloy/Nasaac?

122
Q

What are the Kerb times for Tin?

A

16:05 - 10.

123
Q

What are the Kerb times for Nickel?

124
Q

What are the Kerb times for Flu?

125
Q

What are the Kerb times for zinc?

126
Q

What are the Kerb times for Copper?

127
Q

What are the Kerb times for Lead?

128
Q

What are Valuations?

A

Closing prices discovered through IME select trading activity during the end of trading day.

129
Q

What methodologies are used for margin calculations and risk management?

A

VWAP and last price metrology.

130
Q

From what are precious metals a byproduct of?

A

Bauxite, bornite, Chalcopyrite, scrap metals.

131
Q

In which copper ores are precious metals byproducts?

A

Bornite and Chalcopyrite are byproducts of copper ores.

132
Q

How does the precious metals market compare to LME?

A

The precious metals market is much freer than LME, providing good earning opportunities.

133
Q

What are some uses of precious metals?

A

Precious metals are sometimes added to electrical copper wiring, brass/bronze alloys, and for plating.

134
Q

What benefits do precious metals provide when added to materials?

A

They improve conductivity, durability, strength, wear, and corrosion resistance.

135
Q

What is a Repurchase Agreement (Repo)?

A

A Repo is a transaction where a seller surrenders metal for a period of time and agrees to buy it back at a higher price, representing interest or cost of financing.

136
Q

What is a positive aspect of using Repos?

A

Firms do not have to draw on credit lines from banks and can trade higher volumes.

137
Q

What is a negative aspect of using Repos?

A

There is one-sided risk and potentially high premiums or interest rates.

138
Q

What are the steps in how a Repo works in Base metals?

A
  1. Initial Sale: The seller sells metal to the buyer at a discounted price for immediate cash. 2. Repurchase Agreement: The seller agrees to buy back the same metal at a future date for a higher price.
139
Q

What is one reason for using Repos in Base metals?

A

Liquidity management: Provides immediate cash flow to companies holding significant physical metal inventories.

140
Q

How do Repos provide low-cost financing?

A

Repos often have lower interest rates compared to other forms of short-term borrowing because the physical metal acts as collateral.

141
Q

What is an efficient use of metal inventory with Repos?

A

Allows holders of metal inventories to monetize their assets without permanently selling them.

142
Q

How can Repos be used for hedging and arbitrage?

A

Traders can finance arbitrage opportunities between physical and futures markets and hedge against short-term price volatility.

143
Q

What is the risk management benefit for lenders in a Repo?

A

The lender is protected because the physical metal acts as collateral, reducing credit risk.

144
Q

What is the difference between OSA and House accounts?

A

OSA accounts provide client asset protection, while House accounts do not.

OSA accounts must comply with Mifid & ECA Cass Rules to protect clients.

145
Q

What does ‘segregated’ mean in the context of accounts?

A

‘Segregated’ refers to a buffer or protection for client assets.

It ensures that client assets are kept separate from the firm’s own assets.

146
Q

What is the meaning of ‘long’ in trading?

A

‘Long’ means to buy an asset in anticipation of its price increasing.

Long positions are typically associated with bullish market sentiment.

147
Q

What is the meaning of ‘short’ in trading?

A

‘Short’ means to sell an asset in anticipation of its price decreasing.

Short positions are typically associated with bearish market sentiment.

148
Q

What is the purpose of margin in trading?

A

Margin is required to cover potential losses on leveraged positions.

It is necessary for short positions, as money needs to be deposited.

149
Q

What does ‘COB IM’ stand for?

A

COB IM stands for Close of Business Initial Margin.

It represents the funding required for positions.

150
Q

What is the net position change today for OSA?

A

The net position change today for OSA is +50, totaling $0.9m.

This reflects an optimal needle of 1.7%.

151
Q

What is the net position change today for House?

A

The net position change today for House is +50, totaling $2.8m.

This reflects a desired needle of 1.4%.

152
Q

What are the revenue streams in the warrants department?

A
  1. Trading of warrants
  2. Brokerage services
  3. Premium Arbitrage
  4. Storage and Load-out Management
  5. Financing Arrangements
  6. Hedging and Risk Management services
  7. Consultation on stock Financing
  8. Warrant Transfers
153
Q

What are backwardation opportunities in the warrants market?

A

In a backwardated market (spot prices higher than futures prices), traders may deliver physical metal to gain from higher spot prices.

154
Q

What are contango opportunities in the warrants market?

A

In contango markets (futures prices higher than spot), warrants are held or traded to take advantage of future premiums.

155
Q

What is location arbitrage in the context of warrants?

A

Warrants in certain locations may trade at a higher premium due to high demand or storage constraints. Triland might facilitate such trades for a profit.

156
Q

What is spatial arbitrage?

A

Buying in one market and selling in another market, where the price is higher.

157
Q

What is temporal arbitrage?

A

Using data and statistics over time to exploit price differences.

158
Q

What is the commission policy for carries of less than 14 days?

A

No commission with carries of less than 14 days.

159
Q

What is the commission policy with TriO +Stack combos?

A

No commission with TriOF Stack.

160
Q

What is the commission policy with Tom next?

A

No commission with Tom next.

161
Q

What does ‘TB B’ stand for?

A

TB B = to be billed
Billing will take care of it (same with percentages 1/64)

162
Q

What is ITP GROSS?

A

ITP GROSS is in the price before commission applied.
Give net to to dealer then give brutto to client

163
Q

What is ITP NET?

A

ITP NET is ‘Built in Commission’. Price that clients give is brutto so we need to work out net to to give to dealer

164
Q

How can you make it more expensive for the customer?

A

Add or subtract commission.

165
Q

What is the commission adjustment for Borrow in Contango?

A

Subtract commission.

166
Q

What is the commission adjustment for Borrow in Backward?

A

Add commission.

167
Q

What is the commission adjustment for Lend in Contango?

A

Add commission.

168
Q

What is the commission adjustment for Lend in Backward?

A

Subtract commission.

169
Q

Provide an example of ITP gross and commission.

A

ITP gross: 31c, 0.5 com., borrow.

Example: 31 - 0.5 = 30.5C

170
Q

Provide an example of ITP net.

A

ITP net: dealer netto order brutto

Example: 5c - 0.5 com = 4.5c; 6c + 1$ com = 7c.

171
Q

What does ‘Carries’ refer to in trading?

A

Simultaneously buy and sell the same amount but with different prompt dates.

172
Q

What are the two kinds of Carries?

A

Lend and Borrow.

173
Q

What does Lend involve?

A

Sell near, buy fast.

Sell the earliest prompt date and buy the later prompt date.

174
Q

What does Borrow involve?

A

Buy near, sell far

Buy the earliest prompt date and sell the later prompt date.

175
Q

What is the action associated with ‘Lend’?

176
Q

What is the action associated with ‘Borrow’?

177
Q

What are the categories of LME members?

A

Cat 1, Cat 2, Cat 3, Cat 4, 5, 6

These categories represent different types of membership within the London Metal Exchange.

178
Q

Which companies are classified as Cat 1 members?

A

Clear Street, AMT, Marex, Sucden, StoneX

Cat 1 members have full access to the LME ring and can trade for their own account and for clients.

179
Q

Which companies belong to Cat 2?

A

Triland, Nanhua, RJ O’Brien, Banks, Mitsui, Hydro

Cat 2 members have no ring access but can trade for their own account and for clients.

180
Q

What is the trading capability of Cat 3 members?

A

Only trade for own account

Cat 3 members do not have access to ring trading.

181
Q

What is the status of Cat 4 members?

A

Non-clearing member, need to use services of Cat 1/2 to clear trades

Cat 4 members do not clear trades independently.

182
Q

Who are classified as category 5 members?

A

Non-trading members who wish to be associated with LME brand

These members do not engage in trading activities.

183
Q

What defines category 6 members?

A

Honorary members, private individuals

Category 6 members have a special status within the LME.

184
Q

What access does Cat 1 members have?

A

Access to ring, trade for own account and for clients

This access allows for broader trading opportunities.

185
Q

True or False: Cat 2 members can only trade for their own account.

A

False

Cat 2 members can trade for both their own account and for clients.

186
Q

Fill in the blank: Cat 3 members can _______.

A

only trade for own account

They do not have access to ring trading.

187
Q

What is a long position in metal trading?

A

A trader buys a metal with the expectation that its price will rise in the future

The trader aims to sell the metal later at a higher price to make a profit. This is considered a bullish strategy, anticipating market growth.

188
Q

What is a short position in metal trading?

A

Selling a metal that the trader does not currently own, intending to buy it back later at a lower price

Traders borrow the metal from a broker to sell it, hoping to profit from a decline in its price. This is a bearish strategy, betting on market decline.

189
Q

What is the primary goal of taking a long position?

A

To sell the metal later at a higher price to make a profit

190
Q

What is the primary goal of taking a short position?

A

To buy back the metal later at a lower price after selling it

191
Q

True or False: A long position is a bearish strategy.

192
Q

True or False: A short position expects the market to decline.

193
Q

Fill in the blank: A long position is a _______ strategy.

194
Q

Fill in the blank: A short position is a _______ strategy.

195
Q

What do both long and short positions aim to achieve?

A

To profit from market movements

196
Q

What metals might a trader take long or short positions in?

A

Gold, silver, copper

197
Q

What are the deliverable shapes for Nickel in LME?

A

Cathodes (full plate and cut), Pellets, Briquettes, Rounds

Nickel can be delivered in various forms depending on the market requirements.

198
Q

What is the lot size for Aluminium in LME?

A

25 tonnes

This is the minimum quantity for trading in the LME market for Aluminium.

199
Q

What is the warrant size for Zinc in LME?

A

25 tonnes ($2%)

The warrant size indicates the amount of metal that can be delivered against a warrant.

200
Q

What is the deliverable shape for Lead in LME?

A

Ingots

Lead is commonly traded in the form of ingots in the LME market.

201
Q

What is the lot size for Tin in LME?

A

5 tonnes

This is the minimum quantity for trading in the LME market for Tin.

202
Q

What are the deliverable shapes for Copper in LME?

A

Broken Cathodes, Briquettes

These shapes are typical forms in which Copper can be delivered.

203
Q

What is the lot size for Cobalt in LME?

A

1 tonne

Cobalt has a smaller trading unit compared to other metals.

204
Q

What type of contract is used for Molybdenum in LME?

A

Cash settled

This means that transactions are settled in cash rather than physical delivery.

205
Q

What is the lot size for Aluminium Alloy in LME?

A

20 tonnes

This is the minimum quantity for trading in the LME market for Aluminium Alloy.

206
Q

What is the warrant size for Nickel in LME?

A

6 tonnes (+2%)

The warrant size specifies the allowed variation in delivery quantities.

207
Q

Fill in the blank: The deliverable shapes for Molybdenum in LME include _______.

A

Ingots, Small Sows, Large Sows, T-bars

Molybdenum can be delivered in various forms, depending on the market.

208
Q

True or False: The warrant size for Tin is 5 tonnes with a +2% variation.

A

True

This indicates the specific rules for trading Tin in the LME.

209
Q

What is the Initial Margin (IM)?

A

The amount of collateral (cash or securities) that a trader must deposit with the clearinghouse or broker when entering a derivatives position.

210
Q

What is the purpose of the Initial Margin?

A

To protect the clearinghouse or broker from default risk by ensuring the trader has enough collateral upfront.

211
Q

How is the Initial Margin set?

A

Determined based on the riskiness of the asset, the volatility of the market, and the size of the position.

212
Q

What are common risk models used to calculate Initial Margin?

A
  • SPAN (Standard Portfolio Analysis of Risk)
  • VaR (Value at Risk)
213
Q

Is the Initial Margin a one-time deposit?

A

Yes, it is paid once when the trade is initiated but may be adjusted if market conditions change.

214
Q

Fill in the blank: The Initial Margin is often expressed as a _______ of the notional value of the contract.

A

[percentage]

215
Q

Provide an example of Initial Margin calculation.

A

If a trader enters a futures contract worth $100,000 and the initial margin requirement is 10%, they must deposit $10,000 as collateral.

216
Q

What does variation margin refer to?

A

Additional funds that traders must deposit (or can withdraw) to account for daily market fluctuations in the value of their open positions.

217
Q

What is the purpose of variation margin?

A

To ensure that the account always holds enough collateral to cover current losses, maintaining the integrity of the trading system.

218
Q

What is the mark-to-market (MTM) process?

A

At the end of each trading day, the clearinghouse calculates the profit or loss of each position based on the day’s price changes.

219
Q

What happens if a position loses value in relation to variation margin?

A

The trader must deposit additional funds (a margin call) to maintain the required margin.

220
Q

What can a trader do if their position gains value?

A

They may withdraw excess funds.

221
Q

How does variation margin impact unrealized profits and losses?

A

Variation margin ensures that unrealized profits and losses are realized daily, preventing accumulation of large losses over time.

222
Q

Fill in the blank: A trader holds a futures contract that loses $2,000 in value in a single day. The clearinghouse will issue a _______ , requiring the trader to deposit $2,000 to maintain the position.

A

margin call

223
Q

What role does initial margin play in trading?

A

It protects the clearinghouse against potential default when a position is established.

224
Q

What does variation margin ensure regarding positions?

A

It ensures that positions are constantly collateralized to reflect real-time market conditions, reducing systemic risk.

225
Q

What does LME stand for?

A

London Metal Exchange

226
Q

What is the purpose of the fees charged by the LME?

A

To cover operating costs and maintain a fair and transparent market

227
Q

What are Trading Fees?

A

Fees applied to transactions executed on the LME, charged per contract traded

228
Q

What do Clearing Fees cover?

A

Costs of risk management, margining, and ensuring financial security of trades

229
Q

Who pays Membership Fees?

A

Brokers, dealers, and clearing members to maintain their membership status

230
Q

What do Market Data Fees include?

A

Fees for accessing LME’s price data, indices, and market reports

231
Q

What is the purpose of Warehouse Fees?

A

To cover rent, delivery, and load-out charges for storing metals

232
Q

What services do Administrative Fees cover?

A

Services such as position transfers, collateral management, and account changes

233
Q

Fill in the blank: LME Clearing Fees are charged for clearing trades through _______.

234
Q

True or False: Membership Fees at the LME have a uniform fee structure for all members.

235
Q

What are the main reasons for charging LME Fees?

A
  • Operational Costs
  • Market Integrity
  • Infrastructure Maintenance
  • Revenue for the Exchange
  • Service Accessibility
236
Q

What is the purpose of Trading Fees?

A

To cover costs of facilitating trades and maintaining the trading platform

237
Q

What type of fees are charged for accessing real-time data and historical data?

A

Market Data Fees

238
Q

What do Warehouse Fees support?

A

The physical infrastructure of the LME’s global warehousing network

239
Q

Fill in the blank: Administrative Fees cover _______ and administrative costs.

A

operational

240
Q

What is the LME’s approach to revenue generation?

A

As a for-profit entity, it generates revenue through fees

241
Q

What is the purpose of Membership Fees?

A

To support infrastructure and services provided to members

242
Q

What is a Repo in the base metals industry?

A

A short-term financing arrangement where one party sells metal to another with an agreement to repurchase it at a later date for a predetermined price.

243
Q

What is the purpose of a Repo in base metals?

A

To secure liquidity or manage short-term financing needs.

244
Q

Describe the initial sale process in a Repo.

A

The seller sells metal to the buyer, typically at a discounted price, providing immediate cash to the seller.

245
Q

What happens in the repurchase agreement of a Repo?

A

The seller agrees to buy back the same quantity and quality of metal at a future date for a higher price.

246
Q

What does the price difference in a Repo represent?

A

The interest or cost of financing.

247
Q

List two reasons for using Repos in base metals.

A
  • Liquidity management
  • Low-cost financing
248
Q

How do Repos assist in liquidity management?

A

They provide immediate cash flow to companies holding significant physical metal inventories.

249
Q

Why are Repos considered low-cost financing?

A

They often have lower interest rates compared to other forms of short-term borrowing because the physical metal acts as collateral.

250
Q

What is one benefit of using Repos for metal inventory?

A

Allows holders to monetize their assets without permanently selling them.

251
Q

How can traders use Repos for hedging?

A

Traders can finance arbitrage opportunities between physical and futures markets and hedge against short-term price volatility.

252
Q

What protects the lender in a Repo agreement?

A

The physical metal acts as collateral, reducing credit risk.

253
Q

What happens if the seller defaults in a Repo?

A

The lender retains the metal, which can be sold to recover funds.

254
Q

What are the advantages of using Repos?

A
  • Flexibility
  • Speed
  • Low risk
255
Q

Fill in the blank: Repos provide quick access to _______ compared to traditional loans.

A

[liquidity]

256
Q

What are the challenges and risks associated with Repos?

A
  • Collateral risk (margin call)
  • Price risk
  • Storage and delivery costs
  • Counterparty risk
257
Q

True or False: Repos are only beneficial for sellers in the base metals industry.

258
Q

What is one risk if the value of the metal decreases significantly?

A

The buyer may require additional collateral.

259
Q

What costs need to be factored into the Repo agreement?

A

Storage and delivery costs for physical metals.

260
Q

Repos help balance cash flow by leveraging _______.

A

[metal inventories]

261
Q

What is the lot size for Aluminium contracts?

A

25 metric tonnes

262
Q

What is the lot size for Alumina contracts?

A

50 metric tonnes

263
Q

What is the lot size for Cobalt contracts?

A

1 metric tonne

264
Q

What is the lot size for Copper contracts?

A

25 metric tonnes

265
Q

What is the lot size for Lead contracts?

A

25 metric tonnes

266
Q

What is the lot size for Lithium Hydroxide contracts?

A

1 metric tonne

267
Q

What is the lot size for tin contracts?

268
Q

What is the lot size for Nickel contracts?

A

6 metric tonnes

269
Q

What is the lot size for Zinc contracts?

A

25 metric tonnes

270
Q

What is the lot size for Steel Billet contracts?

A

65 metric tonnes

271
Q

What is the lot size for Steel Rebar contracts?

A

10 metric tonnes

272
Q

What is the lot size for Steel Scrap contracts?

A

10 metric tonnes

273
Q

What is the current outright daily price limit for LME Aluminium?

274
Q

What is the current outright daily price limit for LME Copper?

275
Q

What is the current outright daily price limit for AME Zinc?

276
Q

What is the current outright daily price limit for LME Nickel?

277
Q

What is the current outright daily price limit for LME Lead?

278
Q

What is the current outright daily price limit for LME Tin?

279
Q

What is the current outright daily price limit for LME Aluminium Alloy?

280
Q

What is the current outright daily price limit for LME NASAAC?

281
Q

What is the current outright daily price limit for LME Cobalt?

282
Q

True or False: The current outright daily price limit for LME Cobalt (Fastmarkets MB) is 15%.

283
Q

Fill in the blank: The lot size for Lithium Hydroxide contracts is _______.

A

1 metric tonne

Triland (3 decks)

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