LBMA is at the heart of the 24 hour a day global OTC precious metals market. Transactions are bespoke to meet a client’s needs.
Internationally, precious metals are traded on a 24-hour basis. Either for immediate delivery, known as spot, or for a date in the future. LBMA accredited refiners annually refine approximately 5,000 tonnes of gold and more than 30,000 tonnes of silver.
Good Delivery Bars of gold and silver are traded globally in what is referred to as Over The Counter or OTC market. Approximately 25 billion dollars worth of gold is settled each day in the global OTC market, with London at its centre.
This means all transactions are conducted between two parties without the need for an exchange.
An OTC market offers flexibility, in that two parties can negotiate bespoke transactions that precisely meet the needs of the customer. For example, in terms of price, amounts to be bought or sold, and time to maturity.
It maintains confidentiality and means that all risks, including those of credit, exist only between the two counterparts.
Typical market clients include miners, central banks, governments, fabricators, investors, hedge funds and refiners.
LBMA plays a pivotal role in the 5 main elements that allow the smooth functioning of the global OTC market.
There are five main elements to the market.
All OTC bullion transactions are settled and cleared by London Precious Metals Clearing Limited.
LBMA maintains the Good Delivery Lists for gold and silver. Only bars produced by refiners on these Lists can be traded in the OTC market, which means they have to measure up to the most stringent standards of quality and responsible sourcing.
There are a number of vaults in the London area operated by eight companies, including the Bank of England, which physically hold either gold or silver bars or both.
The vaults act as gatekeepers to the market; ensuring that the bars traded, stored and owned satisfy our Rules.
London is home to one of the world’s largest physical holdings of gold and silver.
LBMA Market Making Members quote two-way prices for precious metal products throughout the trading day. Benchmark prices are established at set times during the day via an auction process. LBMA gold and silver price auctions are independently operated and administered by ICE Benchmark Administration. And those for platinum and palladium by the London Metal Exchange.
These auctions determine prices, which are internationally recognised as benchmark prices and are used around the world as the basis for settlement of a variety of precious metal transactions.
Most OTC transactions settle via unallocated accounts. The customer does not own specific bars, but has a contractual claim against the clearer. With allocated accounts, the customer owns specific bars.
Governance of the OTC market is maintained through the Global Precious Metals Code, which covers market conduct, and the Good Delivery Lists.
LBMA is at the very heart of this global market, providing standards, promoting transparency, instilling confidence, and thus maintaining integrity for all.
The world’s trade in bullion is based in London with a global membership and client base. The first gold rush of 1697 brought gold from Brazil into London, with the subsequent setting up of a purpose built vault by the Bank of England. Further gold rushes followed in California, Australia and South Africa which added to the stocks of gold in London.
Refineries were set up to process this gold and were typically located close to the Bank of England. In 1750 the Bank of England set up the London Good Delivery List for gold, which formally recognised those refineries who produced gold bars to the required standard. Today, the LBMA own and manage the Good Delivery Lists for both gold (and silver).
Pricing, trading, vaulting, clearing and settlement in the London bullion market.Read More
Global Precious Metals Code
LBMA Members must attest adherence to the Code by 1 June 2018.Read More
Prices and Data
View LBMA data sets including daily precious metals prices, vault holdings and clearing statistics.Read More
Delivery in settlement of Loco London transactions in the Over The Counter market.Read More
Five LBMA members offer clearing services across an electronic system.Read More
Custodian services in London offering quality assurance and confidentiality.Read More
Interactive photographic timeline of the London bullion market from inception onwards.Read More
Including definitions, standard documentation and value dates for the current year.Read More
Data on LBMA members’ trading activity.Read More