Words and Phrases - "warrant"

a
85
b
44
c
76
d
50
e
38
f
31
g
18
h
14
i
73
j
2
k
2
l
32
m
55
n
25
o
38
p
79
q
3
r
76
s
89
t
46
u
15
v
9
w
22
y
2

Financial Law Panel, "The London Metal Exchange and LME Warrants", July 2000

Summary Under
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Instrument - Paragraph (f)

Distinction between LME Warrants (representing the beneficial ownership of the metal) and LME Contracts (for the future supply of metal represented by the Warrants) (pp. 2-3)

Ownership of metal traded on the LME is transferred from seller to buyer under the terms of an LME Contract. An essential part of all LME Contracts is an agreement as to the date (the ‘Prompt Date’) on which metal of the agreed specification and amount will be paid for and delivered. Although the LME rule book does not specify when title to the metal passes from seller to buyer, the general view is that, since payment for and delivery of the metal take place on the Prompt Date, it is clear that the parties also intend ownership to pass on the Prompt Date.

The LME Contract provides that the seller’s obligation to deliver the metal sold (i.e. to transfer possession to the buyer of the metal sold under the contract) is fulfilled by the seller delivering to the buyer LME Warrants representing metal which complies with the contract specification. Indeed, under an LME Contract, this is the only way in which the delivery obligation can be met. Delivery of the LME Warrants is not an alternative to delivery of the metal sold – because of the terms of the LME Contract and the nature of LME Warrants, delivery of Warrants amounts to delivery of the metal.

An LME Warrant can be issued only by a warehouse which has been authorised by the LME. Under the LME regulations, which a warehouse must accept before obtaining authorisation, an LME Warrant relates to a specific lot of metal, identified in the Warrant, which has been deposited with the warehouse under a contract for storage. The warehouse agrees that its obligations under the contract of storage relating to the metal specified in the Warrant will be owed to the bearer of the Warrant. Accordingly, the authorised warehouse is under a contractual obligation to deliver to the holder of the LME Warrant on demand the metal specified in the Warrant. The effect of this is to make the holder of the Warrant the possessor of the metal.

Words and Phrases
warrant LME warrant