An LME prompt date is the specific business day on which a London Metal Exchange contract matures and must be settled, either by cash payment or by physical delivery of metal. The London Metal Exchange is unusual among major commodity venues because it does not force traders into monthly expiry cycles. Instead, prompt dates are available daily out to three months, weekly from three to six months, and monthly thereafter, reaching as far as 123 months forward for some metals.1London Metal Exchange. Prompt Date Structure That daily granularity is the single feature that shapes almost everything else about trading on the LME.
Why the LME Uses Daily Maturities
The LME’s core users are industrial: miners, smelters, fabricators, and the banks that finance them. A copper fabricator who needs delivery on a specific Thursday three weeks out does not want to pick between a contract that expires too early or too late and plug the gap with spot purchases. Daily prompt dates let that hedge match a real shipping manifest or production schedule almost exactly.1London Metal Exchange. Prompt Date Structure
The knock-on effect is that LME prices track the physical market closely. When a contract can mature on the precise day metal arrives at a plant, its price reflects supply and demand for that delivery window rather than an averaged monthly figure. The architecture was built for physical traders, and financial participants adapted to it.
The Main Prompt Date Categories
The LME price sheet uses shorthand labels for the maturities that get traded most. Each one plays a different role.
- Cash: settlement two business days from today. Effectively the spot price for LME metals.2London Metal Exchange. Market Data Guide to Reference Data
- Tom: matures the next business day. Used to fine-tune positions just before they reach the cash stage.
- 3-Month: matures exactly three calendar months from today’s trade date. This is the flagship contract and the most liquid point on the forward curve. The LME Official Settlement Price, taken from the last cash offer quoted in the second Ring session, feeds supply contracts and benchmarks worldwide.3London Metal Exchange. LME Official Prices Explained
- Weekly: between three and six months out, prompt dates move from daily to weekly intervals, typically falling on Wednesdays.1London Metal Exchange. Prompt Date Structure
- Monthly (Third Wednesday): beyond six months, contracts mature on the third Wednesday of each month, extending as far as 123 months for some metals.1London Metal Exchange. Prompt Date Structure
How a Prompt Date Is Set
Every prompt date has to fall on a day when both the exchange and the clearing house are open. If a calculated date lands on a weekend or public holiday, it rolls forward to the next available business day. The exchange publishes a trading calendar marking all non-tradable dates.
For monthly maturities the anchor is the third Wednesday of the month. When that Wednesday is itself a holiday, the exchange issues a notice designating a substitute prompt date.1London Metal Exchange. Prompt Date Structure Weekly prompt dates use the same Wednesday convention and the same holiday adjustment. The rules matter because a miscalculated prompt date is a contract that does not exist, and the clearing house will reject it.
Contango, Backwardation, and the Spread Between Prompt Dates
Because so many different prompt dates trade at once, the LME has a visible curve rather than a single forward price. When further-dated contracts cost more than near-dated ones, the market is in contango. When the near date costs more, it is in backwardation.4London Metal Exchange. Introduction to Cash-Settled Futures
Contango is the normal state for a well-supplied market. The premium on forward contracts reflects the cost of storing and financing physical metal over the period. If contango runs wider than those costs, traders buy spot, store it, and sell forward for a guaranteed profit, and that arbitrage puts a natural ceiling on how steep contango gets. Backwardation signals tight supply: the market is willing to pay a premium for metal available now, which usually means low inventories or a demand spike.
Rolling a Position: Borrowing and Lending
Because LME contracts mature on specific calendar days, participants constantly need to shift obligations earlier or later. The mechanism is a “carry,” a paired trade executed as a single transaction so there is no exposure to price movement between the two legs.
Borrowing means buying a near-dated contract and selling a longer-dated one, which pushes a delivery obligation further out. A warehouse operator expecting a delayed shipment might borrow to avoid settling before the metal arrives. Lending is the reverse: selling the near date and buying a later one, useful when metal arrives early or when a trader wants to capture a favorable spread.
The cost of a carry is simply the spread between the two prompt dates. In contango, borrowing costs money because the forward leg is more expensive. In backwardation, borrowing generates a credit. Executing both legs together locks in that spread. This is what keeps LME positions alive for months or years without a complete exit and re-entry.
What Happens on the Prompt Date
When a contract reaches its prompt date and the holder intends to take delivery, settlement runs through LME warrants. A warrant is a document of title for a specific lot of metal sitting in an LME-approved warehouse. Ownership changes are recorded in LMEsword, the exchange’s electronic transfer system.5London Metal Exchange. LMEsword (A separate system called LMEshield handles off-warrant warehouse receipts and is not part of the LME delivery process.)
On settlement day, LME Clear debits buyers by 09:00 and coordinates the warrant transfer so that payment and title change hands at the same time.6London Metal Exchange. Annex 7 – Delivery Timetables If a seller fails to deliver the warrant, LME Clear can execute a buy-in, purchasing or borrowing the metal on the defaulting member’s account and charging all costs incurred. Alternatively, the clearing house may invoice-back the trade, reversing the contract and billing the defaulter for the losses.7London Metal Exchange. LME Clear Limited Rules and Procedures A failed delivery is also an act of misconduct that can trigger disciplinary proceedings.
When the Exchange Can Move a Prompt Date
Prompt dates are not absolute. Under the LME’s Trading Regulations, the Special Committee can defer prompt dates falling in the current month and the following two months if it identifies a market corner, improper trading practice, or other undesirable situation. Affected parties are compensated as the committee determines.8London Metal Exchange. Rules and Regulations
The same deferral power applies when the exchange’s own systems or the clearing house’s systems suffer significant disruption. In a broader force majeure scenario involving war, political upheaval, or legislation that prevents free trading, the exchange can order a complete cessation of trading.8London Metal Exchange. Rules and Regulations The nickel crisis of March 2022, when the LME suspended trading and cancelled billions in transactions, showed these are not theoretical provisions. Anyone holding positions across multiple prompt dates has to accept that settlement can be unilaterally delayed.
A Note for U.S. Traders on Tax Treatment
One point worth flagging because it catches people out. Under Section 1256 of the Internal Revenue Code, the favorable 60/40 tax treatment applies only to a “regulated futures contract” traded on a qualified board or exchange.9Office of the Law Revision Counsel. 26 USC 1256 – Section 1256 Contracts Marked to Market The LME is not on the Treasury Department’s list of qualified exchanges, so standard LME futures do not qualify.
When a U.S. participant takes physical delivery by exercising an LME warrant, the IRS has confirmed the transaction is not a Section 988 foreign currency transaction, and gain or loss on the subsequent sale of the metal is treated as capital gain or loss, with the holding period measured from delivery.10Internal Revenue Service. Chief Counsel Advice 202140016 Traders who assume LME positions get the same 60/40 split as CME contracts can face a materially different bill.