Common use of Principal Nature Clause in Contracts

Principal Nature. There are two types of contracts traded on the LME - Exchange Contracts and Client Contracts. Exchange Contracts are contracts between clearing members of the LME. Client Contracts are contracts between clients and ring dealing members (“RDM”), or associate broker clearing members (“ABCM”), or associate broker members (“ABM”)1. Only RDMs, ABCMs and ABMs may issue Client Contracts. Statements that they issue to clients must state clearly ‘THIS IS AN LME REGISTERED CLIENT CONTRACT’. Contract criteria pertaining to LME contracts, including metal/plastics 1 For the purposes of this notice these categories of members will be referred to as LME members, members or by the appropriate abbreviation. specifications, acceptable currencies, prompt dates, option strike prices for metals etc are detailed in the LME rulebook and appropriate notices. Exchange Contracts are traded between members, matched in the LME matching and clearing system (“LMEMS”) and margined by LCH.Clearnet (“LCH”). Client Contracts are registered at the LCH but margining arrangements are left to members to agree with their customers (subject to LME rules). All LME contracts are between parties acting as principals. This prevents any party entering into an LME Contract as agent for someone else but does not prevent an agent effecting a contract between two parties if the resulting LME contract is between disclosed parties, each acting as a principal. It is an essential requirement of an LME Client Contract that one party must be an RDM, ABCM or ABM. MSI plc is an ABCM. A list of members is available from the LME and on the LME website: xxx.xxx.xxx. A principal relationship does not mean that members do not take on quasi-fiduciary responsibilities when they effect trades for customers. In particular, if a member undertakes to deliver a particular service, for example deal a specific number of lots ‘in the Ring’ (see below), then it should take care to ensure that it complies with all the terms of such a transaction. In respect of Exchange Contracts, an LME broker buying metal or plastic under an Exchange Contract from another LME broker cannot do so as agent for his client. Where an LME broker buys metal or plastic under an Exchange Contract with a view to selling that metal or plastic to his client, this is achieved by entering into a back-to-back Client Contract with the client. Brokers and customers can agree the conditions that apply to their Client Contracts. For example, a client may make it a condition of his Client Contract that the broker must enter into a back-to-back Exchange Contract for the metal or plastic being bought or sold. This does not make the client a party to the Exchange Contract but does create additional duties and obligations owed by the broker under the Client Contract. Clients should be clear about conditions that apply to their Client Contracts and about the obligations and duties that the broker owes as a result of those conditions. Brokers should be clear about the duties and obligations they owe as a result of conditions attaching to their Client Contracts. They should also be clear about the duties they owe to their clients under the FCA’s conduct of business rules. Dual Capacity LME members may act both in the capacity of market maker and broker. They may act in a particular manner depending on a number of circumstances, including the size of the order, the liquidity of the market at the time the order was placed, and, not least, the client’s instructions. Client orders may be filled directly from a member’s ‘book’ or following the purchase/sale of metal or plastic in the LME market. Furthermore, client orders may be offset, amalgamated, broken-up or netted for execution. These methodologies apply equally to orders whether any resulting exchange contract is effected in the ring, in the inter-office market, or on LME Select. Clients with specific order requirements must make these known to the member at the time the order is placed. Clients wishing to know how their order was executed should request such information from the member.

Principal Nature. There are two types of contracts traded on the LME - Exchange Contracts and Client Contracts. Exchange Contracts are contracts between clearing members of the LME. Client Contracts are contracts between clients customers and ring dealing members (“RDM”), or associate broker clearing members (“ABCM”), or associate broker members (“ABM”)1ABM)1. Only RDMs, ABCMs and ABMs may issue Client Contracts. Statements that they issue to clients must state clearly ‘THIS IS AN LME REGISTERED CLIENT CONTRACT’. Contract criteria pertaining to LME contracts, including metal/plastics 1 For the purposes of this notice these categories of members will be referred to as LME members, members or by the appropriate abbreviation. specificationsmetal specification, acceptable currencies, prompt dates, option strike prices for metals etc are detailed in the LME rulebook and appropriate notices. Exchange Contracts are traded between members, matched in the LME matching and clearing system (“LMEMS”) and margined by LCH.Clearnet the London Clearing House (“LCH”). Client Contracts are registered at the LCH but margining arrangements are left to members to agree with their customers (subject to LME rules). All LME contracts are between parties acting as principals. This prevents any party entering into an LME Contract as agent for someone else but does not prevent an agent effecting a contract between two parties if the resulting LME contract is between disclosed parties, each acting as a principal. It is an essential requirement of an LME Client Contract that one party must be an RDM, ABCM or ABM. MSI plc is an ABCM. A list of members is available from the LME and on the LME website: xxx.xxx.xxxLME. A principal relationship does not mean that members do not take on quasi-fiduciary responsibilities when they effect trades for customers. In particular, if a member undertakes to deliver a particular service, for example deal a specific number of lots ‘in the Ring’ (see below), then it should take care to ensure that it complies with all the terms of such a transaction. In respect of Exchange Contracts, an LME broker buying metal or plastic under an Exchange Contract from another LME broker cannot do so as agent for his clientcustomer. Where an LME broker buys metal or plastic under an Exchange Contract with a view to selling that metal or plastic to his clientcustomer, this is achieved by entering into a back-to-back Client Contract with the clientcustomer. Brokers and customers can agree the conditions that apply to their Client Contracts. For example, a client customer may make it a condition of his Client Contract that the broker must enter into a back-to-back Exchange Contract for the metal or plastic being bought or sold. This does not make the client customer a party to the Exchange Contract but does create additional duties and obligations owed by the broker under the Client Contract. Clients Customers should be clear about conditions that apply to their Client Contracts and about the obligations and duties that the broker owes as a result of those conditions. Brokers should be clear about the duties and obligations they owe as a result of conditions attaching to their Client Contracts. They should also be clear about the duties they owe to their clients customers under the FCAFSA’s conduct of business rules. Dual Capacity DUAL CAPACITY LME members may act both in the capacity of market maker and broker. They may act in a particular manner depending on a number of circumstances, including the size of the order, the liquidity of the market at the time the order was placed, and, not least, the clientcustomer’s instructions. Client Customer orders may be filled directly from a member’s ‘book’ or following filled by the purchasemember after it has bought/sale of sold metal or plastic in the LME market. Furthermore, client customer orders may be offset, amalgamated, broken-up or netted for execution. These methodologies apply equally to orders whether any resulting exchange contract is effected in the ring, in the inter-office market, or on LME Select. Clients Customers with specific order requirements must make these known to the member at the time the order is placed. Clients Customers wishing to know how their order was executed should request such information from the member.