Trading in spot, forwards and wholesale deposits in the bullion market is underpinned by the NIPs Code, which is published by the Bank of England.

The LBMA was established in 1987 by the Bank of England (the bullion market's regulator at the time).


Regulation and Supervision

The LBMA has no regulatory responsibilities for the bullion market, this had traditionally been the responsibility of the Bank of England and more recently the Financial Services Authority. However, the recent financial crisis triggered major regulatory changes which came into effect on 1 April 2013. The Financial Services Act (2012) established an independent Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) as a subsidiary of the Bank, as well as new responsibilities for the supervision of financial market infrastructure providers.

The PRA is responsible for the supervision of banks (including bullion banks), building societies, credit unions, insurers and major investment firms.

The Financial Conduct Authority (FCA), which was established out of the Financial Services Authority and is separate from the Bank. The FCA supervises the conduct of 50,000 firms and regulates the prudential standards of firms not covered by the PRA, such as asset managers and independent financial advisers. The LBMA maintains a close working relationship with both the PRA and the FCA.


NIPs code

Trading in spot, forwards and wholesale deposits in the bullion market is underpinned by the Non-Investment Products (NIPs) Code which has been drawn up by participants in the UK foreign exchange, money and bullion markets. The Code can be downloaded from the Bank of England's website here. This code will remain valid until the new code, referred to below, is implemented in mid-2017.

Future Developments

The LBMA annouced on 26th May, 2016 the creation of the global Precious Metals Code. The new code will apply to all precious metals market participants, and will provide participants with guidance on best practice. The Precious Metals Code will replace the Bullion Market annex currently within the Non-Investment Products (NIPs) code.

When the final global Foreign Exchange Code is published in May 2017, it will replace the FX element of the NIPS code, which focuses on best practice in the global wholesale foreign exchange markets.

This new FX Code is being jointly produced by central banks and market participants. For non-foreign exchange market products in the UK market, a project to update and revise the current Code is being led by a joint Sub-Committee of the Bank of England's Money Market Liaison Committee and the Securities Lending and Repo Committee. The relevant sections of the Bank of England's website are here and here. It is expected that all three new Codes will be published in mid-2017.

The renamed Precious Metals Code will set out best practice in the market, with a high level of detail and therefore be more comprehensive than the previous version. In addition to market conventions the code will cover principles that should be adopted by members including compliance, governance, risk management and pre and post trade execution. Illustrative examples of acceptable practices will be included.

This new FX Code is being jointly produced by central banks and market participants. For non-foreign exchange market products in the UK market, a project to update and revise the current Code is being led by a joint Sub-Committee of the Bank of England's Money Market Liaison Committee and the Securities Lending and Repo Committee. The relevant sections of the Bank of England's website are here and here. It is expected that all three new Codes will be published in mid-2017.

Ruth Crowell Chief Executive of the LBMA commented “The NIPs code is currently mandatory for LBMA members and it is important that we enhance and maintain the new Code's application across the international precious metal markets.”

HMR&C considers Full Members of the Association as official members of the market and can therefore trade under the terms of the Terminal Markets Order (TMO).

The TMO, the oldest part of the UK's VAT legislation, was intended to be VAT neutral. It was put in place to minimise the VAT administration burden as far as the UK commodity markets were concerned, to maintain its competitiveness particularly in relation to non-EU markets.

A Memorandum of Understanding (MOU) has been signed between HM Revenue and Customs and the LBMA and the London Platinum and Palladium Market (LPPM) Association. It is intended to assist Members of both associations:

  • understand the transactions that take place on the London Bullion markets
  • determine the supplies that take place for VAT purposes
  • determine the liability to VAT of those supplies in respect of the different precious metals and markets
  • confirm those transactions that need to be reported on quarterly statistical reports of cross-border services.

The purpose of the MOU is to provide background information on trades typically affected by LBMA and LPPM Members, their current treatment for VAT purposes, and where greater clarity and certainty can be introduced.

The LBMA has developed the Responsible Gold Guidance to: combat serious abuses of human rights: avoid contributing to conflict: comply with high standards of anti-money laundering; tackle terrorist financing practices. The LBMA Guidance consolidates and formalises already existing high standards of refiner's due diligence complied with by refiners. It also provides a feasible framework for the refiners and is credible for the outside word by incorporating existing Anti-Money Laundering Management Systems and combining them with the OECD Due Diligence Guidance. Further information relating to the LBMA's work in relation to Responsible Gold can be found by clicking here.