LME Prompt Dates, Contract Calendars, and Nearby Contracts
Summary
The document explains LME prompt dates as the dates on which contracts trade and relates them to the sequence of available contract maturities. It contrasts the usual monthly contract pattern with LME's more frequent dates nearby, followed by weekly and other maturities farther out. The prompt contract is the nearest unexpired contract; systems can identify the nearest contract at different date frequencies.
The answer emphasizes that trading obligations follow the calendar and rules of the exchange where the contract is listed, regardless of the trader's location. Its example is a trader outside the United States who holds a New York-listed equity position through a US market holiday: the local calendar does not make that exchange open. Trading systems therefore need market-specific holidays, settlement currencies, and settlement rules. The discussion is a general explanation and does not work through a specific Asian metal-trading calendar or quantify how calendar differences affect prices or hedges.
Key ideas
- An LME prompt date is a date on which a contract trades.
- The prompt contract is the nearest unexpired maturity, with contract frequency varying by distance from the front of the curve.
- A trader must follow the calendar and rules of the exchange where the instrument trades.
- Trading systems need exchange-specific holidays, settlement currencies, and settlement conventions.
- The answer gives general calendar guidance but no detailed regional metal example.
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Full text
# What is Prompt Date Structure? # What is Prompt Date Structure? In LME website Prompt Date Structure is explained as this. Why there are prompt dates? LME trading calendar isn't universal to all other calanedars found in the market. So how do "Non-tradable dates and substitute prompt dates" affect other trading calendars? How are traders from other regions trading at their local calendar/exchanges do adjustments or how does prompt dates affect them? Can someone give a simplified example using above concept with regards to a metal trading in an Asian region? ## Answer by user12348 (score 2) https://quant.stackexchange.com/a/11313 By Prompt dates, LME means dates on which contract trades. Normally, you see monthly contracts. Prompt month is also front month. LME is providing daily contracts up to 3 months out, then weekly and so on as in your reference. Generally prompt month is the front month or nearby month that is closest unexpired month. You can replace month by day or week as is the frequency. Probably better to talk interms of prompt contract. Trading systems have mechanism of determining prompt month ( aka front month, nearby month). By the same token for daily contracts they can have first nearby contract. you get the picture. There is no trading without knowing the market in which you are trading. If you are in Asia trading nn LME you have to follow LME rules. It does not matter where you are - what matters is where you are trading. All traders, anywhere, have to follow the calendar of the market they are trading. E.g. If you are in UK, trading S&P in NYSE, then you have to know you cannot trade on July 4th as that is a holiday. If you are holding a position you want to sell that day, you cannot. All trading systems are market aware, they plug into them holidays, settling currencies, settlement rules etc which local traders know and expect them there in their trading system.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.