World gold Council, LME and key market participants to start up LMEprecious.
The World Gold Council and the London Metal Exchange (LME), together with Goldman Sachs, ICBC Standard Bank, Morgan Stanley, Natixis, OSTC and Societe Generale, today announce their intention to introduce a suite of exchange-traded and centrally cleared precious metals products.
The initiative has been driven by the need for greater market transparency, to support and aid ongoing regulatory change, provide more 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.
LMEprecious service has been designed based on extensive consultations with officials of the central market.
Today’s 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 World Gold Council, said: “This is another important step in the modernization 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.
The new suite of products will complement the market OTC bilateral
”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 form 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 over-the-counter (OTC) 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 maximize capital efficiencies.
Share in the success of the new contracts
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 make sure efficient price discovery and set up market depth. Additional market participants are openly invited to take part 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.