London Gold Price RFP Update
Friday, October 17, 2014
On 4th September, the LBMA announced the launch of the Gold Price consultation survey as well as a RfP process, inviting proposals from potential providers for a gold price solution. The deadline for responses to the survey and submission of RfP was Friday 10th October.
Gold Consultation - First Survey
In total, there were 130 responses to the survey, covering a diverse range of market participants. The general consensus was that the gold pricing mechanism should be an electronic auction - based solution. Additionally, market participants suggested some enhancements which include a display of real volumes and an increase in the number of direct participants with representation from non-banks. The responses to the main questions are summarised below:
Q1. For your current business model, how useful is the current London gold price mechanism? The average score was 8 (out of 10).
Q2. How often do you use the gold price mechanism? 69% daily, 25% periodically, 2% never and 4% n/a.
Q3. What proportion of your trading is carried out on the gold fix? 83% answered that at least a proportion of their trading was carried out on the gold fix.
Q4. Is the gold price discovery method sufficient? Yes 76%. No 24%.
Q5. Would you consider acting as a contributor? Yes 31%, No 42% and 27% maybe.
Gold RFP & Further Consultation
The LBMA has received eight proposals from ten companies (as some were submitted as joint proposals) who are interested in developing and administering a gold price mechanism. The shortlist is as follows: Autilla Ltd (Sapient), CME Group (Thomson Reuters), ICE, LME and EBS. A Market Seminar will be held to provide the opportunity for members of the market to consider presentations from all of these companies. Executive summaries of the proposed solutions will be circulated publically by the LBMA following the seminar.
It is hoped that a market consensus will emerge in November, after consultation with the market and discussions with the regulators. The chosen solution provider will then develop the solution which is expected to be implemented by end of 2014, early 2015.
Commenting on the seminar, Ruth Crowell, the LBMA Chief Executive, said:
“Only with market engagement can a solution work in practice and we are keen that as many market participants are involved in the process. We are also specifically looking to identify those participants who are willing to take part in the launch of the new mechanism.”
For further information please contact Aelred Connelly, PR Officer, on
Tel: +44 (0)20 7796 3067 or AU.Consult@lbma.org.uk.
The LBMA will be making no further press announcements in advance of executive summaries following the seminar.