Answers to the most common enquiries about the market and the LBMA.
The LBMA are often asked questions by either members of the Association or the general public. A compilation of the most Frequently Asked Questions are available here, which have been categorised by subject into four main sections.
- Which types of companies can join the LBMA?
The LBMA's membership stands at over 148 companies in more than 24 countries which have been admitted as either Members or Associates. All companies within the membership must have activities that are closely related to the London market in gold or silver bullion. These activities include trading, broking, shipping and storage, mining and refining, inspection and assaying and research. Membership on the part of individuals is not permitted.
- Who can become an Exchange Affiliate Member
Exchange Affiliate Members must be companies operating Trading Exchanges. Such companies must offering Exchange platforms services upon and through which Precious Metals are traded and/or settled and cleared.
- Who can become a Member?
Members must be companies or organisations which are actively involved in the London bullion market. For entities which trade, this means trading gold or silver bullion or related derivatives such as forwards and options in the loco London market. Members also include fabricators, brokers, refiners and shippers. A number of Members have been reclassified as Market Makers.
- What does being actively involved in the London bullion market entail - must it involve trading?
For companies which trade bullion and derivatives, this means trading in the loco London market with at least three existing members. However, while the majority of Full Members are involved in trading, other market sectors are represented, in particular broking and shipping.
- Who can be an Associate?
The Associate category includes many different types of market participants. For instance Associates may be traders in other markets. If so, they must have bullion based relationships with LBMA Members. Alternatively, Associates may be companies whose activities are judged to be relevant to the London bullion market, such as inspection, assaying and consultancy.
- What are the differences in status between a Member and an Associate?
The payment of fees is one difference (see next question). The main difference in terms of status within the LBMA is that Associates do not have voting rights. Associates also have more limited options for sponsoring other applications. See the questions about sponsorship below for more details. In the UK bullion market, Associates are not considered by HM Revenue and Customs as members of the market and hence cannot trade under the terms of the Terminal Markets Order. Refiners need to apply for GDL status before they can become an Associate.
- What does Membership Cost?
Members and Associates pay an application fee of £1,000 (which is not refundable if the application is rejected for whatever reason). On acceptance of membership an annual subscription is payable of £12,000 for Market Making Members, £8,000 for Full Members and Exchange Affiliate Members, and £5,000 for Associates.
- What does the Membership Review Programme involve?
The LBMA represents a number of organisations across the precious metals market, which includes but is not limited to, banks, refiners, fabricators, traders as well as those providing storage and secure carrier services. As part of the on-boarding process for Members and GDL Refiners, the LBMA is committed to following a robust due diligence process. To ensure the continued maintenance of these standards, the LBMA conducts a programme of due diligence reviews on its Members and GDL Refiners, throughout their membership / accreditation with the LBMA. The process is directly linked to that conducted within the initial membership on-boarding process.
- Should a company seeking to join apply as a Member or as an Associate?
There are some general guidelines:
- UK trading companies and banks with a branch located in the UK, whether authorised by the FSA or passported in by the FSA (originally authorised elsewhere within the EU or EEA) must apply to become Full Members.
- In most cases, banks without a full branch in the UK would apply as Associates though in exceptional circumstances, the LBMA may admit such banks as Full Members.
- Dealers, producers and refiners located outside the UK should apply as Associates.
- Companies providing services to the market, such as assaying or consultancy, should apply as Associates.
Generally speaking, UK-based companies that are directly involved in the market are expected to apply to become Members, though refiners based in the UK may be accepted as Associates at the Board's discretion.
- How does sponsorship of applications for Membership work?
Both Member and Associate applicants need to name three companies from amongst the LBMA Membership that are willing to act as sponsors when they submit an application. These should be companies with which the applicant has had a bullion based trading relationship for at least one year. Each sponsor will be asked by the Association to supply a letter of recommendation confirming its belief that the applicant is a suitable candidate for the category of Membership for which it has applied and describing the scope and duration of the bullion-based relationship between the two companies.
- Who can act as a sponsor to an application?
In the case of applications for membership, all three sponsors must be Full members (whether Market Making or Full Members). If the applicant is a trading company, all sponsors must be on the List of Members (List A) which would normally be expected to carry out KYC due diligence with counterparties before trading with them. Other types of company (eg shippers or fabricators) applying for membership may if they choose have a List B Member as one of their three sponsors. In the case of applications for Associateship, one of the sponsors may, if desired, be a List B Member or an Associate. The others must be on the Members List A, one of which must be a UK Regulated Financial Institute. This change was brought in following the 2013 Associates Review to strengthen the credibility of the Association and its Members. The current versions of List A and List B will be provided to companies which apply for membership. The Membership Committee is unlikely to give favourable consideration to an application unless the above sponsorship requirements are met.
- Can a company apply with less than three sponsors?
No. Applicants must be able to name three companies as sponsors. Applications naming less than three sponsors cannot be considered.
- Should an applicant contact the three companies it wishes to nominate as sponsors before submitting its application?
Yes. It is essential for an applicant to contact its proposed sponsors prior to submitting an application in order to ensure that these companies are willing to support the application. The LBMA will formally request letters of support from the sponsors after receipt of the completed application.
- What information will sponsors be asked to provide about the applicant in their letters of support?
Sponsors will be asked to provide brief details of the scope and extent of their bullion-based business relationship with the applicant. They must confirm that this relationship has existed for a minimum of one year. Where appropriate (where the applicant is a trading company), the sponsor is asked to confirm that the applicant has passed a KYC test. In the case of an application from a company that provides a physical service (such as transporting, storing metal or providing assaying services) the sponsor is asked to provide evidence that they have carried out some form of KYC on the applicant.
- Under what circumstances might it not be necessary for a sponsor to have carried out a full KYC due diligence assessment on an applicant?
Whether or not a full KYC due diligence assessment needs to have been carried out depends on the nature of the applicant's business. Examples where a KYC test would not normally be required are companies providing e.g. shipping, consulting, information or assaying services to Members. However (as mentioned above) the sponsor will be asked to provide evidence that some form of KYC due diligence was carried out before enlisting the services of the applicant.
- Must the business relationships between the applicant and its sponsors have been in place for a minimum period of time prior to the submission of a membership application?
Yes - normally they must have been in place for at least one year, though in some cases the LBMA may accept the duration of one of the relationship being less than one year.
- What is the difference between a Market Maker and a Member?
Market Makers must quote each other in the chosen product categories (any combination of spot, options and forwards) in both gold and silver throughout the London business day.
- Can a company be a Market Maker in only gold or only silver?
No - while it is possible to choose one or more of the three main product categories (spot, options and forwards), a company must do so for both gold and silver.
- Can a company not currently within the LBMA membership apply to become a Market Maker?
It is most unlikely that the LBMA would accept an application to become a Market Making Member from a company not within the LBMA membership. The normal procedure is for a company to first become a Member and to apply for reclassification subsequently.
- What steps should a Member take if it wishes to be reclassified as a Market Making Member?
The company should contact the Chief Executive in writing stating in which product category or categories it would like to apply for Market Making status. It will then need to undergo a probationary period of approximately three months, during which time it must provide price quotes to the current Market Making Members. At the conclusion of this period, a poll is taken of the Market Making Members to determine if they are satisfied with the service provided by the applicant and are willing to recommend its application for Market Making status to the Management Committee. The Management Committee would normally expect all Market Makers (in the appropriate categories) to have agreed on the reclassification before approving it.
- What should a Member, Affiliate or Associate company do if it undergoes a name change?
It should submit notice of the name change in writing to the Chief Executive, outlining the reason for this change. While each case is reviewed on a case by case basis by the Membership Committee, a change of name would not typically result in the need for reapplication.
- What should a Member, Affiliate or Associate company do if they undergo a change of ownership?
It should submit notice of the change in ownership in writing to the Chief Executive outlining the reason for this change. While each case is reviewed on a case by case basis by the Membership Committee, a change in ownership would typically result in the need for reapplication.
- What should a company do if it wishes to resign its membership?
It should submit its resignation in writing to the Chief Executive before the end of the subscription year (which ends on 31st December). No part of the subscriptions paid is refundable in the case of resignation.
- Where can I get further information?
For more information about joining the LBMA or to receive an application pack, please contact us at firstname.lastname@example.org.
- How much are the Good Delivery annual maintenance fees?
From 2015, the Good Delivery annual maintenance fees are as follows:
- Gold or Silver (1 metal) - £8,000
- Gold and Silver (2 metals) - £12,000
- What was the reason for the increase in fees?
During the past decade there is been a significant increase in Good Delivery associated initiatives including: Pro-active Monitoring, Proficiency Testing, Certified Reference Materials and Regulatory work associated with REACH and Responsible Gold. The substantial increase in fees will enable the LBMA to continue to provide the necessary level of support to the GDL Refiners operating in the London Market into the future.
- How often are the fees reviewed?
Going forward, fees will be reviewed annually.
- Are bars other than standard 400 ounces for gold and 1,000 ounces for silver that have been produced by a refiner on the Good Delivery List also considered as being London Good Delivery?
The weight of bars must fall within the range specified in the Good Delivery Rules. Bars such as kilobars, 100-ounce and smaller bars are not acceptable in the London wholesale market, (though they may be in other markets or exchanges). For further details on kilobars produced by GDL refiners visit www.goldbarsworldwide.com.
- How long must a refiner be in business before it is eligible to apply for Good Delivery status?
The company should have been in business for five years and the refinery should have an operating history of three years.
- Is there a minimum requirement for a company's net worth in order to apply for Good Delivery?
Yes, It should be at least the equivalent of £15 million.
- What is the average length of time from the submission of an application to achieving Good Delivery status?
This varies depending on how quickly the company is able to provide any additional information that may have been missing from its initial application and how long it takes to provide the sample bars following successful completion of the assay test.
Delays may also be encountered in the shipping of samples and the payment of fees, which will lengthen the overall application procedure. The minimum timescale from the submission of a complete application to accreditation is approximately four months but an average of approximately 6 months is more likely.
- What is the Former List?
The former list includes refiners and the bars, which are no longer considered to be acceptable in the London Bullion Market.
- What are some of the reasons that a refiner might be transferred to the Former List?
There are a number of separate cases, which can relate either to a particular bar (as determined by its dimensions and/or marks) or to a particular refinery. A refinery may be transferred to the Former List if:
- Its ownership has changed and the new owners are unable to provide satisfactory evidence of their bona fides
- It requests to be removed (for instance because it does not wish to pay the annual maintenance fee)
- It ceases production
- Its tangible net worth falls consistently below the LBMA minimum of £15 million
- Its production of refined metal falls consistently below the minima specified by the LBMA (10 tonnes pa for gold and 50 tonnes pa for silver)
- It fails to maintain the technical standards shown in the LBMA's Good Delivery Rules
- It does not respond adequately to justifiable customer complaints
- A previously registered bar (as defined by its dimensions and marks) may be transferred to the Former List for one or more
of the reasons listed below, while the refiner continues to be listed but with a modified bar:
- a. The form or dimensions of the bar do not meet current requirements
- b. The marks on the bars have been modified. For instance, a company may change from a portrait to a landscape format. Other reasons for such changes include rebranding by the company (e.g. using a new logo) or a change of ownership (i.e. a new name).
- Once a refiner is transferred to the Former List, are the bars that it produced while on the Good Delivery List still considered Good Delivery?
- What steps might the LBMA take if it received complaints about the quality of bars produced by a refiner?
The LBMA would investigate the complaint, if necessary including an examination the bars and if the complaint appeared justified it would write to the refiner asking it to "stand behind" its bars by making appropriate restitution to the customer.
- What is the reason for the weight tolerance on Good Delivery silver bars?
The main reason for having a tolerance on the weight of Good Delivery bars is because in the overwhelming number of cases they are produced by being cast into open moulds.
This involves the caster pouring the molten metal from a ladle and judging essentially by eye when the mould is full.
The LBMA has never tried to enforce a totally uniform approach to the dimensions of Good Delivery bars. As long as the bars are within the range specified in the Good Delivery Rules, they are considered to be acceptable in principle. The idea behind the recommended range is the facilitation of manual handling (not just in the London vaults but also in the markets where bars are consumed) while at the same time minimising the number of operations involved in the refinery, the vault and at the point of consumption.
There are three ranges that could be mentioned:
(a) 500 to 1250 troy ounces
(b) 750 to 1100 troy ounces
(c) 900 to 1050 troy ounces
Range (a) was in force until 1999. It was then replaced by a range (b), the current range, because the lower limit of 500 would mean that many bars would have to be produced and processed for a given tonnage while the upper limit of 1250 gave bars which were dangerously heavy for manual handling. Although it is not mandatory, refiners are asked to produce bars within range (c) essentially because this facilitates the assembly of uniform pallets.
- Information on Bar Numbers for Russian and Uzbek Bars
The common approach adopted by LBMA Good Delivery refiners in Russia and Uzbekistan is to use a 4-digit bar number plus a 2-Cyrillic letter code (which changes with each resetting of the bar number to 0001) and a separate 4-digit year code. The combination of the company's brand mark, the two Cyrillic letter code and the 4-digit bar number provides a unique identifier for every bar.
Some London vaults have used the nearest Roman equivalent to the two Cyrillic characters as part of the bar number. These provide a unique identifier and such bar numbers will continue to be used as bars move within the London vaulting system.
Other vaults have ignored the Cyrillic letters when recording the bars in their information systems. This can result in the same 4-digit bar numbers appearing more than once in bar lists (though each of them has a different Cyrillic code).
In order to avoid this apparent duplication, LBMA vaults will, from February 2010, record such bars with an 8-10 digit bar number formed from the 4-digit year concatenated with the 4-digit bar number and the vault manager may also additionally include a maximum of two alpha characters being the Roman equivalent of the Cyrillic characters shown on the bar.
Occasionally older bars with Cyrillic letter codes but no year marks arrive in London. In such cases, the receiving vault should use the nearest Roman equivalent to the Cyrillic characters as the first characters of the bar number.
- What are the clearing statistics?
These are the net volume of loco London gold and silver transfers settled between clearing members of the LBMA.
- What is included in the statistics?
Loco London transfers from one party in a clearing member's books to another party in the same clearing member's books or in the books of another clearing member. They also include physical transfers and shipments by clearing members and transfers over clearing members' accounts at the Bank of England. Excluded from the statistics are allocated and unallocated balance transfers where the sole purpose is for overnight credit and physical movements arranged by clearers in locations other than London.
- What is the frequency of the statistics?
They are compiled monthly and represent the average amount of metal transferred on average each day measured in millions of troy ounces.
- Do the LBMA publish any other statistics on clearing?
The LBMA also publish the average value of transfers measured in US $, using the monthly average London pm fixing price for gold and the average London fixing price for silver. The value of gold transfers are measured in billions of US dollars and the value of silver in millions of US dollars. The LBMA also publish the average number of gold and silver transfers recorded each day.
- Who are the clearing members of the LBMA?
There are five members of the LBMA who offer clearing services, who collectively have formed a company called the London Precious Metals Clearing Limited (LPMCL). They are The Bank of Nova Scotia-ScotiaMocatta, HSBC, ICBC Standard Bank, JP Morgan Chase and UBS AG.
- Who accredits companies to provide vaulting services to the London bullion market?
The LBMA does not accredit institutions to provide vaulting services to the London bullion market. Instead the London Precious Metal Clearing Limited (LPMCL) provides formal recognition of companies to provide vaulting services.
- Who provides vaulting services for the London bullion market?
The LPMCL recognises the following institutions as providing vaulting facilities for the storage of precious metals in London:
- Bank of England
- *The Bank of Nova Scotia-ScotiaMocatta
- Brink’s Ltd
- *HSBC Bank USA National Association - London branch
- *JPMorgan Chase Bank
- Malca Amit
- Loomis International Ltd
- *UBS AG
- Does a current listed refiner have to use an auditing body on the LBMA's Approved Service Provider list?
- Are there any costs associated with becoming an Approved Service Provider?
No, all we ask is that you complete the application form and submit it to email@example.com for consideration.
- What competencies and skills does an Auditor need to fulfil in order to become an Approved Service Provider?
Please refer to Auditor Skills and Competencies - Table 6; Third Party Audit Guidance.
- How does the LBMA Responsible Gold and Silver Guidance affect potential GDL applicants?
Any Refiner applying to be an LBMA Good Delivery accredited Gold or Silver Refiner is required to implement the LBMA Responsible Gold or Silver Guidance and pass an audit prior to becoming a member of the Good Delivery List. All GDL Applicants must use an auditor on the LBMA's Approved Service Provider List. Please click here to see the current list in the LBMA Toolkit.
- What is the procedure for becoming an Approved Service Provider?
Once you have submitted your application form, it can take approximately eight weeks to receive a response. This is because the LBMA Physical Committee makes the final decision and they have to review your application at their monthly meetings. We will email the main contact who submitted the application to let them know outcome. If you are successful, the title of your auditing body and main contact's details will be added to our Approved Service Provider list.
- What is the annual review procedure for Approved Service Providers?
The Physical Committee will review the Approved Service Provider list on an annual basis. The LBMA Executive will ask the listed auditing bodies if anything has changed within their organisation or operations since their original application. If nothing has changed, no action is required. Supporting evidence in the form of documentation will be required if substantial changes have been made. The Physical Committee will then decide if the auditing body can remain on the list.
- Where can I find templates for audits based on ISO 19011:2011?
Refiner's Summary Report - Appendix 8; Third Party Audit Guidance.
- Where can I find templates for audits based on ISAE 3000?
- Where a refiner has been removed from the Good Delivery List due to failure to adhere to the LBMA Responsible Gold or Silver Guidance, when are they able to re apply for Good Delivery Status?
A refiner has to wait five years before submitting their application.
- Is the LBMA Toolkit compulsory for Responsible Gold and Silver Guidance audits?
The LBMA Toolkit is intended for use as a guide to how refiners may implement the Responsible Gold or Silver Guidance. Refiners may adopt their own documentation and checklists as part of their controls and procedures.
- Does the LBMA provide a list of high risk countries?
No. It is up to refiners to establish their own risk assessments and investigations according to their activities.
- What does it mean if the refiner’s certificate has expired, but their name still appears on the Current Gold List?
If a refiner’s certification appears to be expired but they remain on the Gold Current List, the refiner’s audit is in progress. They remain Good Delivery.
- What happens once an audit report has been submitted? How long does it take to become accredited?
Once your audit report has been received, it can take up to three weeks before the Compliance Review Panel provides an official response. A member of the Panel may get in touch during that time with any follow up questions. It can take an additional ten days before you receive your certificate. This process will take longer if your audit requires a Corrective Action Plan to be submitted.
- We are experiencing delays with submitting the audit report. What will happen to our accreditation?
Deadline extensions may be granted under exceptional circumstances. You are advised to get in touch with the LBMA as quickly as possible in advance of the deadline.
- How does mutual recognition of third party refiner due diligence audits work?
From 2017, Good Delivery List refiners will be required to perform audits against the Responsible Gold or Silver Guidance. Supporting documentation from audits under other industry schemes may be submitted as part of the refiner’s audit deliverables.