Understanding the Aluminum Auction

The Aluminum Auction, from CME Group, supports established aluminum premium markets by giving participants the ability to anonymously transact physical material in the spot market via their clearing member.

As an anonymous and electronic platform, the Aluminum Auction provides:

• Transactions that can support regional aluminum premium markets
• The ability to transact in the spot market via clearing members, thereby reducing counterparty due diligence
• The ability to disclose the materials, attributes, and location prior to the sale
• A competitive, anonymous, and efficient tender process with a larger universe of potential counterparties

Leveraging existing relationships between COMEX warehouses, clearing members, and futures customers, the Aluminum Auction facilitates the purchase and sale of physical aluminum on a spot basis. Auction participants must register for access to the auction platform and receive authorization from their COMEX clearing member to participate in the Aluminum Auction. Additionally, auction participants must register and activate a CME Group Login ID.

Eligible aluminum that can be designated for the auction must:

• Be stored at a COMEX-approved warehouse for aluminum
• Meet all specifications for the Aluminum Futures contract and
• Not be on a COMEX warrant

To host an auction, a seller will first work with the warehouse to designate eligible aluminum for auction. The warehouse will then generate an Inventory ID that identifies the aluminum set for auction. At CME Group, Inventory IDs are created and stored electronically. The Inventory ID is created by the warehouse and is held in the Exchange’s system in the name of the metal owner’s clearing firm and contains all relevant information related to the metal held in storage.

The seller then uses the auction technology to schedule an auction at their desired date and time, disclose the attributes and location of the material up for auction, and select a floor price where bidding will open.

Upon scheduling the auction, the auction platform will automatically distribute email notifications to registered participants. When the auction matches a single buyer and seller, invoices are issued by the clearing house to the buyer’s clearing firm and the seller’s clearing firm.

The buyer’s clearing firm and the seller’s clearing firm will exchange payment and the Inventory ID on behalf of the buyer and seller. The warehouse will then be notified of the new owner of the aluminum.

The Aluminum Auction connects aluminum market participants and facilitates their physical aluminum transactions in a transparent and secure market environment.