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LONDON BULLION MARKET ASSOCIATION

Notes for Editors/Producers 

October, 2017

Ruth Crowell, CEO and other senior members of the LBMA are, subject to schedule, available for interviews to explain and discuss the international bullion market centred in London. The market makes a significant contribution to the business of the City of London. In July 2017, for example, daily average net cleared turnover was 19.1m oz of gold, equivalent in value to some $24bn.

 

Pricing

The internationally respected LBMA pricing mechanisms for gold, silver, platinum and palladium are owned by the LBMA and administered by IBA (a subsidiary of ICE) – gold and silver, and the London Metal Exchange (platinum and palladium). Currently 15 participants (primarily banks) are involved in the twice-daily gold pricing mechanism, seven in the once daily silver price and five in the twice daily platinum and palladium pricing mechanism.  (see the LBMA website LBMA.org.uk for details).

 

Market Issues  - Threat to Liquidity

The LBMA is actively involved in lobbying efforts in response to Basel III’s proposed provisions on the Net Stable Funding Ratio (NSFR). The key impact of this regulation on the precious metals market will be a potential fall in liquidity as banks look to leave the market because of high costs imposed by NSFR; or increased business costs as banks look to pass the charges on.

In consultation with lawyers, the LBMA has a position paper for key stakeholders which summarises the potential impact of NSFR on the precious metals market and includes proposals to address the issues.  NSFR provisions are expected to become applicable two years after adoption, expected to be in Q3 2020.

 

Market Development/Trade Reporting

The LBMA is working with Cinnober BOAT to deliver new services to the precious metals market and in so doing to improve transparency, efficiency and expand IT presence.  A first result of this work is the requirement for LBMA members to begin trade reporting in all four precious metals. This data will provide members and clients with meaningful market turnover statistics which, among other uses, will be vital in supporting lobbying efforts re for example the NSFR (as above).

The deadline for the 13 LBMA market makers to begin trade reporting is September 2017 followed by other members later in the year. After a period of quality checking, it is expected the first data will be published in early 2018.

 

London Vault Holdings

A further move towards increased market transparency took place with beginning of the monthly publication of the total amount of gold held at the Bank of England and the amount of gold and silver held in the London vaults maintained, either directly or via storage agents by LBMA clearing members. The data is published monthly, three months in arrears. The figures as at end-May, 2017, were 7,515 tonnes of gold valued at $300 billion and 32,768 tonnes of silver valued at $18 billion.

 

Assuring Good Delivery

The Good delivery Lists for gold and silver are maintained by the LBMA. Only bars that meet Good Delivery standards are acceptable in the physical settlement of a Loco-London gold or silver transaction. The high level of consistency within the London market is maintained by ensuring both refiners and vaults implement the Good Delivery Rules relating, for example, to a bar’s assay, weight and markings.

 

Responsible Sourcing

The LBMA’s Responsible Gold Guidance (RGG) builds on existing Anti-Money Laundering and Know Your Customer management systems and audit practices. RGG makes what is a voluntary system (OECD Guidance) mandatory for all refiners wishing to sell into the London Bullion Market. This structure is designed to assure investors and consumers that the gold they buy is responsibly sourced. To reinforce the LBMA’s commitment to responsible sourcing practices within the Good Delivery Lists, from 1 January 2018 compliance to the new LBMA Responsible Silver Guidance becomes a mandatory requirement for all refiners wishing to sell into the London Bullion Market, and is intended to assure investors and consumers that all London silver stocks are responsibly sourced.

 

Precious Metals Code

The LBMA launched the first ever Precious Metals Code defining trading best practice. The new Code is closely modelled on the FX Code produced by the G20 central banks but considerable work had to be done to align it to the international precious metals market. LBMA members have until June 2018 to implement and attest adherence to the Code.

 

Clearing

Bullion trading in London is conducted over-the-counter but virtually all OTC trades are cleared by the LPCML (London Precious Metals Clearing Limited) who work closely with the LBMA and its membership.

 

Price Forecasting

The LBMA does not express a view of the future direction of precious metals prices. However, analysts from LBMA member firms participate in an annual price forecasting competition where they are invited to predict the average price of gold, silver, platinum and palladium for the year ahead. Analysts’ forecasts and commentaries are published at the end of January each year and are available on the LBMA website (www.lbma.org.uk).

 

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LBMA Membership and Management

The LBMA membership currently numbers 146 Members and Associates located in 30 countries. All members must be operational in areas closely related to the London Bullion Market – these include trading, broking, shipping and storage, mining, refining, inspection, assaying, and research.

 

The LBMA Board is comprised of 10 directors headed by non-executive Chairman, Paul Fisher, former deputy head of the UK Prudential Regulatory Authority at the Bank of England. The rest of the Board comprises six member representatives, two members of the LBMA executive, Ruth Crowell (CEO) and Sakhila Mirza (General Counsel) and non-executive director, Andy Quinn (director of Rangold Resources).

 

To arrange interviews or to request comment on aspects of London’s precious metals market, please contact:

 

Aelred Connelly

LBMA Public Relations Officer

aelred.connelly@lbma.org.uk

Tel:  0207 337 9771

 

Simon Rostron

LBMA Media Consultant
Simon@rostronparry.com

Tel:  07802 292 252

 

 

1-2 Royal Exchange Buildings, Royal Exchange, London EC3V 3LF

Tel: +44 (0)20 7796 3067 Fax: +44 (0)20 7283 0030 www.lbma.org.uk