Trading in spot, forwards and wholesale deposits in the bullion market is underpinned by the Global Precious Metals Code.

Global Precious Metals Code

The LBMA published the Global Precious Metals Code on May 25, 2017. This applies to all precious metals market participants, and provides participants with guidance on best practice. The Precious Metals Code replaced the Bullion Market annex which had been within the Non-Investment Products (NIPs) code. The Code is accompanied by an Explanatory Note which provides guidance on how the Code may be used and implemented. 

The Code is intended to define a robust, fair, effective and transparent market where all participants are able to transact following best practice guidelines.

It sets out a common set of principles to promote the integrity and effective functioning of the global market covering ethics, governance, compliance and risk management, information sharing and business conduct.

All market participants involved in the global wholesale Precious Metals market are expected to act according to the principles of this Code. LBMA members will be required to attest their conformance with the Code by signing a Statement of Commitment.

The Code has been prepared by the LBMA following an extensive period of consultation with its Members as well as participants from the wider Precious Metals market.

FX and Money Markets Codes

The Fair and Effective Markets Review (FEMR) involved a comprehensive review of the Fixed Income,Currency and Commodities markets in order to restore trust in the markets and influence cross border discussion on trading practices. This review led not only to the development of the Global Precous Metals Code but two other Codes for the benefit of these markets.

The FX Global Code, a code of conduct for the whoelsale foreign exchange (FX) market was published by the Bank for International Settlements on 25 May, 2017. The new FX Code establishes a common set of guidelines for good practice in the FX market, a vital part of the global finanical system with turnover of more than $5 trillion a day. A copy of the FX Code can be viewed here.

The UK Money Markets Code, setting out the standards and best practice expected from participants in the deposit, repo and securities lending markets was published by the Bank of England on 26 April, 2017. To read a copy of the Code please refer to the Bank of England’s website here.


Regulation and Supervision

The LBMA has no regulatory responsibilities for the bullion market, this had traditionally been the responsibility of the Bank of England and more recently the Financial Services Authority. However, the Global Precious Metals Code helps to fill this space by defining standards of conduct for all market participants in the precious metals market to adhere to.

The financial crisis triggered major regulatory changes which came into effect on 1 April 2013. The Financial Services Act (2012) established an independent Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) as a subsidiary of the Bank, as well as new responsibilities for the supervision of financial market infrastructure providers.

The PRA is responsible for the supervision of banks (including bullion banks), building societies, credit unions, insurers and major investment firms.

The Financial Conduct Authority (FCA), which was established out of the Financial Services Authority and is separate from the Bank. The FCA supervises the conduct of 50,000 firms and regulates the prudential standards of firms not covered by the PRA, such as asset managers and independent financial advisers. The LBMA maintains a close working relationship with both the PRA and the FCA.

HMR&C considers Full Members of the Association as official members of the market and can therefore trade under the terms of the Terminal Markets Order (TMO).

The TMO, the oldest part of the UK's VAT legislation, was intended to be VAT neutral. It was put in place to minimise the VAT administration burden as far as the UK commodity markets were concerned, to maintain its competitiveness particularly in relation to non-EU markets.

A Memorandum of Understanding (MOU) has been signed between HM Revenue and Customs and the LBMA and the London Platinum and Palladium Market (LPPM) Association. It is intended to assist Members of both associations:

  • understand the transactions that take place on the London Bullion markets
  • determine the supplies that take place for VAT purposes
  • determine the liability to VAT of those supplies in respect of the different precious metals and markets
  • confirm those transactions that need to be reported on quarterly statistical reports of cross-border services.

The purpose of the MOU is to provide background information on trades typically affected by LBMA and LPPM Members, their current treatment for VAT purposes, and where greater clarity and certainty can be introduced.

The LBMA’s Responsible Sourcing Programme was set up to consolidate, strengthen, and formalise existing standards of refiners’ due diligence. The Responsible Gold Guidance has been mandatory for all gold Good Delivery refiners since 2012, and the LBMA is currently expanding the scope of its responsible sourcing framework to include silver. Further information relating to the LBMA's work in relation to Responsible Sourcing can be found here.