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Quantitative Finance · Glossary

What is LME lending rule?

Definition 8.5 Markets III: Commodities, Energy and Crypto · Chapter 8 — Metals

An LME lending rule requires a holder of a dominant long position (of warrants and near-dated contracts) to lend (sell for the nearer date and buy back for the later one) at no more than a set backwardation, so that holding most of the deliverable metal cannot be used to squeeze shorts at will.

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