The Importance and Role of the London Bullion Market Association
The London Bullion Market Association (LBMA) is the trade association that represents the wholesale gold and silver bullion market in London. London is the hub of the international Over-the-Counter (OTC) market for gold and silver, with a clientele that includes the majority of the central banks that hold gold producers, refiners, fabricators and traders from all over the world.
The LBMA was formally incorporated in 1987. This was done in close consultation with the Bank of England, which, at the time, was the regulator of the bullion market.
Stringent criteria for assaying standards and bar quality have made the Good Delivery List of LBMA as representing the de facto standard for the quality of gold and silver bars. LBMA periodically checks the assaying capabilities of refiners on the Good Delivery List. This is carried out under the Proactive Monitoring programme of LBMA.
The on-going work of the Association encompasses many areas, among them refining standards, trading documentation and the fostering of good trading practices. Some examples:
o In the refining industry, the LBMA Good Delivery List is widely recognized as representing the de facto standard for the quality of gold and silver bars; in large part thanks to the stringent criteria that an applicant must satisfy before being listed. In order to enhance the reputation of refiners on the Good Delivery List, in January 2004, the LBMA introduced proactive monitoring.
o In conjunction with the foreign exchange and money markets in London, the association has developed the Non-Investment Products Code, which provides a code of conduct by which all members and associates are required to abide.
o The annual Precious Metals Conference of LBMA is now widely regarded as “the” professional forum for the bullion market of the world.
Historically, the members of the London bullion market regularly posted lists of accredited smelters and assayers, whose gold and silver bars they would accept without question. These transactions were in settlements conducted between each other and with other acceptable counterparts. These bars earned the distinction of London Good Delivery status.
The main requirements to be considered for the listing are normally that a refiner must:
o Have an established track record of at least three years of producing the refined metal, for which the listing is being sought
o Produce a minimum quantity of refined metal per year – 10 tonnes of gold and 30 tonnes of silver
o Have a tangible net worth of at least £10 million equivalent
o Furnish evidence of their ownership structure and directors
o Provide, if required, a suitable letter of endorsement, e.g., from the central bank or an acceptable commercial bank in their country of operation.
Standard bars are bars of approximately 400 fine troy ounces for gold and approximately 1,000 troy ounces for silver. Bars are listed at the discretion of the Management Committee of the LBMA, which reserves the right to make any investigations that it deems appropriate into an applicant for listing.