LME­pre­cious To Bring Greater Trans­parency To Pre­cious Met­als Mar­ket

Solitaire - - SPECTRUM -

The World Gold Coun­cil (WGC) and the Lon­don Metal Ex­change (LME), to­gether with Gold­man Sachs, ICBC Stan­dard Bank, Mor­gan Stan­ley, Natixis, OSTC and So­ci­ete Gen­erale, plan to in­tro­duce a suite of ex­change-traded and cen­trally-cleared pre­cious metal prod­ucts.

The ini­tia­tive has been driven by the need for greater mar­ket trans­parency, to sup­port and aid on­go­ing reg­u­la­tory change, pro­vide ad­di­tional ro­bust­ness to the pre­cious met­als mar­ket, broaden mar­ket ac­cess, make trad­ing more cap­i­tal-ef­fi­cient and trade life­cy­cle man­age­ment eas­ier. LME­pre­cious will be de­vel­oped to ac­com­mo­date the in­ter­ests of the full range of mar­ket stake­hold­ers and to re­in­force the strengths of the Lon­don mar­ket.

The an­nounce­ment fol­lows an ex­tended process of en­gage­ment with ma­jor mar­ket par­tic­i­pants and users, and the LME­pre­cious ser­vice has been de­signed based on ex­ten­sive con­sul­ta­tion with core mar­ket play­ers. Ad­vanced dis­cus­sions are tak­ing place with a num­ber of other lead­ing in­sti­tu­tions that have in­di­cated their strong sup­port for this ini­tia­tive.

Aram Shish­ma­nian, the chief ex­ec­u­tive of the WGC, said: “This is an­other im­por­tant step in the mod­erni­sa­tion of the gold mar­ket. It will strengthen Lon­don’s po­si­tion in the global gold mar­ket, en­abling it to meet the needs of all par­tic­i­pants, at­tract new play­ers and sat­isfy the high­est stan­dards of reg­u­la­tory com­pli­ance.

“We are proud to have been the cat­a­lyst for this process, defin­ing the new trad­ing ca­pa­bil­i­ties and driv­ing mar­ket en­gage­ment. We are con­fi­dent that the new of­fer­ing will be suc­cess­fully im­ple­mented and sup­ported by the mar­ket.”

LME­pre­cious will com­prise spot, daily and monthly fu­tures, op­tions and cal­en­dar spread con­tracts for gold and sil­ver. Fu­ture de­vel­op­ments will in­clude plat­inum and pal­la­dium con­tracts. All trad­ing will be cen­trally cleared on LME Clear, the LME’s cut­ting-edge, real-time clear­ing house, and lever­age the Lon­don mar­ket’s ex­ist­ing de­liv­ery in­fra­struc­ture.

The new prod­uct suite will com­ple­ment the bi­lat­eral over­the-counter mar­ket, of­fer­ing mar­ket par­tic­i­pants sim­i­lar lev­els of ex­e­cu­tion flex­i­bil­ity, in­clud­ing the abil­ity to bring bi­lat­er­ally ne­go­ti­ated (phone-based) trades into clear­ing. Mar­ket par­tic­i­pants will also ben­e­fit from tight on-ex­change price dis­cov­ery and a prod­uct model de­signed to max­imise cap­i­tal ef­fi­cien­cies.

Garry Jones, the chief ex­ec­u­tive of the LME, said: “We are de­lighted to be work­ing with the World Gold Coun­cil and a group of lead­ing banks, to now take this project for­ward to­wards an en­hanced mar­ket struc­ture. LME­pre­cious opens up trad­ing op­por­tu­ni­ties for ex­ist­ing LME mem­bers and their clients, as well as for new par­tic­i­pants wish­ing to take ad­van­tage of op­ti­mised pre­cious met­als trad­ing.”

The banks par­tic­i­pat­ing in this ini­tia­tive will act as liq­uid­ity providers for the pre­cious con­tracts to en­sure ef­fi­cient price dis­cov­ery and es­tab­lish mar­ket depth. Ad­di­tional mar­ket par­tic­i­pants are openly in­vited to par­tic­i­pate in sup­port­ing and shar­ing in the suc­cess of the new con­tracts.

LME­pre­cious will launch in the first half of 2017, fol­low­ing a com­pre­hen­sive process of in­te­gra­tion and test­ing with par­tic­i­pants and sub­ject to reg­u­la­tory ap­provals.

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