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Bar Integrity, an important feature of Gold Market

Shakhila Mirza from LBMA

Bullion Bulletin team met Shakhila Mirza at APPMC 2019, she shared her view on Bar Integrity within the industry and how important is it.

Madam, please share us about the new innovation which is coming for Bar integrity?

LBMA has been looking at ways to provide more confidence to traders who are dealing with physical gold bar. The question is, how to access that it’s a genuine bar. So, at LBMA, we have started the process of identifying the right technology to implement, so that each bar uses its technology to prove that the bar has been produced by the refiners with the actual label on the bar.

We had a number of responses from technology solutions providers on the various security features that can be incorporated on the bar. Our decision has been that we shall set a criteria or a standard to recognize a good security feature that refiners should be using as a part of the production specific. So rather than choosing one security feature, they would have a choice to select from a list of different security features. So, we have to understand from the market as to what kind of security features should the gold bar need to have so as to provide the confidence in the actual trading of these bars.

The second aspect of the Gold bar integrity is provenance, which essentially deals with questions such as where is the actual gold coming from, what is the origin of that bar and so on. We have been looking at block chain as a potential solution for this. Can block chain help in supply chain provenance?  We see a lot response with many great ideas. However, the challenge is there are lot more questions with the block chain than there are answers. For example, integrity of the data on the block chain, data management standards followed by various blockchain solutions and inter-operability of various solutions and so on. LBMA will be engaging with service provider to understand how blockchain technology is developing and how blockchain technology can address and lower the risk through the supply chain. For now, we are observing and engaging with the technology providers to learn more before we get to use these technologies.

London OTC market

There has been some criticism about the lack of data on London OTC markets. We wanted to address it. As you know, transparency helps regulators. It also increases investor’s confidence as they can understand the liquidity that these markets provide. To help investors with information, LBMA has been gathering daily data from market participants on their daily trading activities for over three years. It is voluntary for non-members. Since November 2018, LBMA went live with publishing the OTC trade data of London markets. Although it captures all the statistics of LBMA members, it may not capture non-members trade data. The information is accessible from the LBMA website. Besides this, we have other data such as Options- strike matrices, volume and price tranche etc. The process is a way to increase transparency of the market and address information needs of the investors.

Disclaimer: Views are personal and not the views of the publisher.