Gold market development organisation, the World Gold Council, and futures exchange, the London Metal Exchange (LME), together with key market participants including Goldman Sachs, ICBC Standard Bank, Morgan Stanley, Natixis, OSTC and Societe Generale will be launching the initiative as a means to drive greater market transparency and to support and aid ongoing regulatory change.
It will also provide additional robustness to the precious metals market, broaden market access, make trading more capital efficient and trade life cycle 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 of LMEprecious service follows an extended process of engagement with major market participants and users, and the 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.
World Gold Council CEO Aram Shishmanian says the announcement of LMEprecious is another important step in the modernisation of the gold market as 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,” he says.
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 will leverage the London market’s existing delivery infrastructure.
The new product suite will complement the bilateral over-the-counter market, offering market participants similar levels of execution flexibility, including the ability to bring phone-based bilaterally negotiated 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, CEO of LME says that the company is delighted to be working with the World Gold Council and a group of leading banks, with the aim of taking 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,” he says.
The banks participating in this initiative will act as liquidity providers for the precious contracts to ensure efficient price discovery and establish market depth.
However, 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.