Platinum

Prices

Benchmark and price discovery mechanism
Futures markets and contracts
Main physical markets
Platinum price links
Historic prices

Benchmark and price discovery mechanism

Platinum is a precious metal and an industrial metal at the same time. Platinum prices are mostly responsive to economic supply and demand factors as other non-precious metals. However, since platinum supply is very limited, platinum prices are more volatile than the other industrial metals. The key factors that may influence prices are the policies in the most important producing countries, in particular, South Africa and the Russian Federation; the size of the Russian stockpile and the economic situation of main consuming countries, like Japan, United States and Europe. Prices of other precious metals can also play an important role in platinum price discovery mechanism.

The main reference price for platinum is the London Fix which is considered as the international benchmark. The quotation is done twice a day and most of the deals are based on it. The fixing is transmitted by international press agencies and it is used as a benchmark by industrialists and producers all around the world.

The fixing procedure is simple: at the beginning of each session, the chairman announces an opening price to members' dealing room, which is then transmitted to members' customers. When the dealers receive the orders from their customers, members declare themselves as a buyer or a seller and state the amount in which they wish to trade. If the amounts do not balance, prices are adjusted upwards or downwards and the process is repeated. The Fixing price would be the one at which all orders are cleared. The chairman declares when it occurs. Settlement shall be made two business days after the date of the contract.

Futures markets and contracts

Platinum futures and options are primarily traded in:

NEW YORK MERCANTILE EXCHANGE (NYMEX): http://www.nymex.com

TOKYO COMMODITY EXCHANGE (TOCOM): http://www.tocom.or.jp

MIDAMERICA COMMODITY EXCHANGE (MIDAM): http://www.cbot.com

For information purposes only, specifications of NYMEX and TOCOM contracts at the beginning of 2001 are listed bellow. However, specifications are subject to change. Updated contracts may be directly consulted in the above mentioned addresses.

NYMEX Platinum Contract Specifications

Trading Unit
Futures: 50 troy ounces.
Options: One NYMEX Division platinum futures contract

Trading Hours
Futures and Options: 8:20 A.M. to 2:30 P.M. for the open outcry session.
After-hours trading is conducted via the NYMEX ACCESS electronic trading system beginning at 4 P.M. on Mondays through Thursdays and concluding at 8 A.M. the following day. On Sunday, the electronic session begins at 7 P.M. All times are New York time.

Trading Months
Futures: Trading is conducted over 15 months beginning with the current month and the next two consecutive months before moving into the quarterly cycle of January, April, July, and October.
Options: Trading is conducted in the nearest three contiguous calendar contract months, plus the next two months of the quarterly cycle of January, April, July, and October.

Price Quotation
Futures and Options: Dollars and cents per troy ounce. For example: $339.70 per troy ounce.
Minimum Price Fluctuation
Futures and Options: Prices changes are in multiples of $0.10 (10) per troy ounce, $5 per contract.

Maximum Daily Limit
Futures: $25 per troy ounce ($1,250 per contract). There is no maximum daily limit during the closest cycle month and any months preceding it. If the settlement price reaches the maximum daily limit for two consecutive days, the expanded daily limit schedule will go into effect. The maximum expanded daily limit is $50 per troy ounce ($2,500 per contract).
Options: No price limits.

Last Trading Day
Futures: Trading terminates at the close of business on the fourth business day prior to the end of the delivery month.
Options: Expiration occurs on the second Friday of the month prior to the delivery month of the options contract traded.

Exercise of Options
By a clearing member to the clearinghouse not later than 5:30 p.m., or 45 minutes after the underlying futures settlement price is posted, whichever is later, on any day up to and including the option's expiration.

Options Strike Price Intervals
Strike prices are in increments of $10. At least seven strike prices will be listed at all times. Delivery Period Delivery notice may be given by the seller to the Exchange on the last business day preceding the delivery month or any subsequent business day up to the third business day prior to the end of the delivery month. The basis of delivery is the settlement price on the day the delivery notice is issued.
Exchange of Futures for, or in Connection with, Physicals (EFP)
The buyer or seller in a cash market transaction may exchange a futures position for a physical position of approximately equal quantity. EFPs may be used to either initiate or liquidate a futures position.

Inspection
Inspection must be made by an Exchange-approved assayer. Assay certificates are valid provided the metal covered is thereby passed directly from the assayer to an Exchange-approved depository by means of an Exchange-approved carrier.

Packaging
Platinum may be delivered in packaged or unpackaged form. If packaged, the package must be sealed by an Exchange-approved assayer or producer of an approved brand so that it cannot be opened without destroying the seal. The package must bear the lot or bar number, weight, grade, name, or logo of the assayer or approved brand mark, and the symbol of the metal.

Grade and Quality Specifications
In fulfillment of each contract, the seller must deliver 50 troy ounces (5%) of platinum not less than .9995 fineness, with no single piece weighing less than 10 ounces. Each contract unit may consist of ingots or plates, each incised with the lot or bar number, weight, grade, name, or logo of the assayer, and symbol identifying the metal.

Position Limits
1,500 contracts for all months combined or in any one month, but not to exceed 700 contracts from the beginning of the last business day prior to the delivery month.

Margin Requirements Margins are required for open futures and short options positions. The margin requirement for an options purchaser will never exceed the premium paid.

Trading Symbols
Futures: PL
Options: PO

TOCOM Platinum Futures Contract Specifications

Date of Listing

January 26,1984

Standard

Fine platinum of minimum 99.9% purity

Contract Unit

500 g

Delivery Unit

500 g

Trading Method

Computerized continuous trading

Price Quotation

Japanese Yen per gram

Minimum Price Fluctuation

JPY 1 per gram

Daily Price Fluctuation Limit

Standard Price	Price Limit
Less than JPY 1,200	JPY 40 per gram
JPY 1,200 - JPY 1,799	JPY 50 per gram
JPY 1,800 - JPY 2,399	JPY 60 per gram
JPY 2,400 and over	JPY 70 per gram

Customer Position Limit
(long position and short position each)

1st contract month in an even month:	100 contracts
1st contract month in an odd month:	150 contracts
2nd contract month:	200 contracts
Other contract months:	500 contracts each
Total:	2,000 contracts

Initial Customer Margin

Standard Price	Margin
Less than JPY 1,200	JPY 30,000 per contract
JPY 1,200 - JPY 1,799	JPY 37,500 per contract
JPY 1,800 - JPY 2,399	JPY 45,000 per contract
JPY 2,400 and over	JPY 52,500 per contract

Customer Trading Commission to FCMs(per contract)

Contracted Price	Commission
Less than JPY 1,000	JPY 3,100 per contract
JPY 1,000 - JPY 1,399	JPY 3,400 per contract
JPY 1,400 - JPY 1,799	JPY 3,700 per contract
JPY 1,800 - JPY 2,199	JPY 4,000 per contract
JPY 2,200 - JPY 2,599	JPY 4,300 per contract
JPY 2,600 - JPY 2,999	JPY 4,600 per contract
JPY 3,000 and over	plus JPY 300 for every JPY 400 increase in Contracted Price

Customer Delivery Commission to FCMs

The same as above

Trading Hours

9:00 a.m. to 11:00 a.m. , 12:30 p.m. to 3:30 p.m.

Contract Months

All even months within a year

Last Trading Day

The third business day prior to the Delivery Day

Delivery Day

The last business day of each even month except December (24th for December: If the day is a holiday, Delivery Day is advanced.)

Delivery Points

Specified warehouses

Delivery

Physical delivery (not cash settlement)

Main physical markets

The main physical market is the London Platinum and Palladium Market: http://www.lppm.org.uk

The London Platinum and Palladium Market was established in 1987 with the purpose of formalizing the informal trade that had taken place on a principal to principal basis for many years. London Platinum and Palladium Quotations were expanded and upgraded to full Fixings in 1989. Worldwide leading organizations in platinum are represented in this market.

Platinum market making members quote buying and selling prices for spot delivery. The movements of these prices respond to supply and demand and the result is a very competitive price. Trading takes place during London and Zurich working hours.

Deliveries normally take place at a vault specified by the member unless both parties agree on other arrangements. There are also storage facilities.

Forward prices are also quoted for specific maturity dates so that producers and industrial consumers may hedge in volatile market conditions.

The London/Zurich Good Delivery List is a list of acceptable Melters and Assayers maintained by the Market in order to facilitate trading.

Platinum price links

South African Chamber of Mines: http://www.bullion.org.za/

Kitco, Inc.: http://www.kitco.com/market

A-Mark Precious Metals: http://www.amark.com

Alaron Trading: http://www.alaron.com

Platinum Guild International: http://www.platinumguild.org (accessible only with a password)

Johnson Matthey's Platinum Today: http://www.platinum.matthey.com/prices/index.html

US Geological Survey: http://minerals.usgs.gov/minerals/pubs/commodity/platinum

CNNfn: http://cnnfn.cnn.com/markets/commodities.html#metals

Reuters: http://www.reuters.com

The Bullion Desk: http://www.thebulliondesk.com

The Mining Web: http://www.theminingweb.com

Metalprices.com: http://www.metalprices.com

Bloomberg: http://www.bloomberg.com/markets/commodities/cfutures.html

Quoteline: http://www.quoteline.com/

Commodity Library: http://commodities.thefinancials.com

Historic prices

Platinum prices (US$ per oz), 1968 - 2006

Source: UNCTAD based on data from Johnson Matthey

After a period of relative stability (between 1991 and 1999), prices of platinum have increased continually until the first quarter of 2004. The volatility of platinum prices on the period 1994-1999 was about 4.3 % whereas the bullion gold volatility on the time period was about 5.2 %. On the period 1999-2004 the volatility of platinum has sharply increased to reach 11.5 % while the gold volatility was about 6.7 %.

It is quite interesting to point out that, platinum prices have received the support of strong demand on that period to show a volatility index almost three times bigger than the previous period of 1994-1999. This huge rise concerning platinum is basically due to the jewellery sector (more particularly China and Japan) and to the autocatalyst sector (in accordance with environmental issues).

Platinum prices compared to others precious metals (US$ per oz), 1987-2007

Source: UNCTAD based on data from Datastream

Volatility or price instability index

The volatility of the prices is represented here by the percentage of deviation of the variables compared to the trend of exponential tendency for a given period. This index of instability is calculated according to :

Where Y(t) is the observed value of the variable
y(t) is the estimated value by adjustment to the exponential trend of the observed values and n is the observation numbers of the sample.