A Guide to the London Precious Metals Markets

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A Guide to the London Precious Metals Markets

The London Platinum & Palladium Market

Contents
Preface Introduction The London Bullion Market Association The Members Market History The London Platinum and Palladium Market The Members Market History An Over the Counter Market Market Fundamentals What sets London Apart? Market Basics Market Conventions Market Regulation Dealing and Products Users of the London Precious Metals Market Dealing Basics The London Gold and Silver, Platinum and Palladium Fixings Borrowing, Lending and Forward Transactions Precious Metals Loans and Deposits Precious Metals Forwards Options in the Precious Metals Markets Additional Dealing Facilities Deferred Accounts Spot Deferred Forward Contract Inventory Loans Gold Forward Rate Agreements (FRA) and Interest Rate Swaps (IRS) FRA & IRS Credit Risk Exchange for Physical (EFPs) Support Facilities Vaulting Clearing Standard Documentation Taxation Glossary of Terms Bar Weights 28 28 30 30 30 31 33 34 48 15 16 16 21 23 24 24 25 26 1 2 2 2 3 3 3 4 4 6 6 7 11 12 13 13 13 14

Preface
This guide to the London precious metal markets was produced and is published jointly by the London Bullion Market Association (“LBMA”) and the London Platinum and Palladium Market (“LPPM”). It updates the previous guide issued by the LBMA in 2001 (which covered the markets for gold and silver bullion) and extends the coverage to include platinum and palladium. The publishers are pleased to acknowledge the contribution of Douglas Beadle to the preparation of the text describing the platinum and palladium markets. Any comments or questions about the guide should be sent to its editor, Ms Susanne Capano at the LBMA.

London Bullion Market Association 13/14 Basinghall Street, London EC2V 5BQ. www.lbma.org.uk mail@lbma.org.uk Tel: +44 020 7796 3067 Fax: +44 020 7796 2112

London Platinum & Palladium Market chairman@lppm.org.uk www.lppm.org.uk

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A G u i d e t o t h e L o n d o n P re c i o u s M e t a l s M a rke t s

Introduction
The Members of the London Bullion Market Association (LBMA) and the London Platinum and Palladium Market (LPPM) offer an unparalleled range of facilities and products for the trading of gold and silver (collectively referred to as “bullion”) and platinum and palladium (collectively with bullion referred to as “precious metals”). The London precious metals markets operate on a principal-to-principal basis and have an international client base with a wide diversity of interests. The purpose of this Guide is to explain the operation of the London precious metals markets. It defines the principles upon which the markets operate, describes the facilities and products that are available, explains the way in which transactions are quoted and conducted and indicates the type of clients for whom the products may be appropriate. The credit risk or exposure involved between dealer and client in using individual products is also examined. The Guide also introduces potential users to the marketplaces and the roles of the LBMA and the LPPM. It covers the support facilities of vaulting and clearing, the regulatory regime under which the markets operate and the standard documentation that supports them. Finally, it points to useful sources of further information. As an aid, a glossary of some commonly-used market terms is included as Appendix 1. The London Bullion Market Association

The LBMA is a trade association that acts as the co-ordinator for activities conducted on behalf of its Members and other participants in the London bullion market. It acts as the market’s principal point of contact with regulators and other official bodies, such as HM Revenue and Customs. It ensures the continued evolution and health of a marketplace for gold and silver in which all participants can operate with confidence. A primary function of the LBMA is its involvement in the promotion of refining standards by maintenance of the London Good Delivery List. In...
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