1. Background and Key Principles

1.1 What is the Global Precious Metals Code?

1.1.1

This set of global principles of best practice in the Precious Metals Market, the “Global Precious Metals Code” or “Code” has been developed to provide a common set of guidelines to promote the integrity of the wholesale Precious Metals Market.

It is intended to promote a robust, fair, effective and appropriately transparent market in which diverse groups of Market Participants, supported by resilient infrastructure, are able to confidently and effectively transact at competitive prices that reflect available market information and in a manner that conforms to acceptable standards of behaviour.

1.1.2

1.1.2 This Code should serve as an essential reference for Market Participants when conducting business in the Precious Metals Market and when developing and renewing appropriately tailored internal procedures. It is not intended to be a comprehensive guide to doing business in the Precious Metals Market. This Code is also not designed to be a manual outlining the operations of the global Precious Metals Market. A good reference document for that is the Guide to the OTC Precious Metals Market produced separately by London Bullion Market Association (LBMA) and London Platinum and Palladium Market (LPPM).

1.1.3

All organisations actively involved in the global OTC wholesale trading market for Precious Metals are expected to act according to the broad principles of this Code and to have procedures designed to uphold its general tenets. Market Participants, for the purpose of this Code, are not only drawn from financial institutions but comprise all those involved in the Precious Metals Market (see section 1.2). All Market Participants are strongly advised to adopt the use of the Code in order to further enhance best practice within the marketplace.

1.1.4

Given the diverse nature of Market Participants and their varying degrees of sophistication, the Code needs to be applied proportionally. This does not mean that different standards apply, merely that the systems and control environment should be commensurate to the nature of a Market Participant’s type and level of engagement in the Precious Metals Market, as well as the size and complexity of its activities in that Market.

1.1.5

This Code will be periodically reviewed and so evolve over time.

The Code is organised around four leading principles

• A. Ethics: Market Participants are expected to behave in an ethical and professional manner to promote the fairness and integrity of the Precious Metals Market.
• B. Governance, Compliance and Risk Management: Market Participants are expected to have a sound and effective governance framework that provides clear accountability and comprehensive oversight of Precious Metals activity. Market Participants are expected to promote and maintain a robust control and compliance environment which effectively identifies and manages the risks associated with their engagement in the market.
• C. Information Sharing: Market Participants are expected to be clear and accurate in their communications. Market Participants are also expected to appropriately manage Confidential Information and to promote effective communication that supports a robust, fair, open and appropriately transparent Precious Metals Market.
• D. Business Conduct: Market Participants are expected to effectively manage each stage of the transaction life cycle, i.e. pre-trade, execution and post-trade, in order to promote a robust, fair, open and appropriately transparent Precious Metals Market.

FX Global Code and The UK Money Markets Code Context

1.1.6

The overall standards are not particular to Precious Metals and the themes are common across all OTC markets. For example, the Global Foreign Exchange Committee has produced a FX Global Code¹, and the Bank of England has produced the UK Money Markets Code². However, the intention of this Code is to recognise those overall standards and also the features which are unique to Precious Metals.

Applicable Law

1.1.7

Market Participants must be aware of, and comply with, the laws, rules and regulations applicable to them and the Precious Metals Market in each jurisdiction in which they do business (“Applicable Law”). This Code does not impose legal or regulatory obligations on Market Participants nor is it a substitute for regulations, but rather it is intended to serve as a supplement to any and all local laws, rules and regulation by adopting global best practice and processes. This guidance does not represent the judgement, nor is it intended to bind the discretion of, any regulator, supervisor or other official sector entities with responsibility over the relevant markets or Market Participants, and it does not provide a legal defence to a violation of Applicable Law.

1.1.8

Market Participants are responsible for adopting their own internal policies and procedures designed to comply with Applicable Law. In the event of a conflict between the Applicable Law and this Code, the Applicable Law will prevail.

1.1.9

Certain terms used in this Code may have specific definitions or meanings under Applicable Law, which may imply certain duties or obligations in a jurisdiction. Since this document is meant to serve as a Code of best practice for Market Participants operating in different jurisdictions, it is not intended that the local meaning of terms in any one jurisdiction apply to the interpretation of this global Code. For the avoidance of doubt, terms used in this Code should be read according to their commonly accepted meaning as terms of market practice in the Precious Metals Market and no specific legal or regulatory meaning should be imputed or ascribed to them. Annex 2 contains a glossary of the capitalised terms featured throughout this Code.

Industry Standards

1.1.10

Market Participants may also have other industry standards that are relevant to their business. By way of example, Good Delivery List Refiners must comply with LBMA’s Responsible Sourcing Guidance, under which they must undergo an independent third-party assurance every year to confirm compliance. Market Participants are responsible for compliance with relevant applicable market standards.

1.2 To whom does the Precious Metals Code apply?

1.2.1

The Precious Metals Market features a diverse set of Market Participants that engage in the market in different ways and across various Precious Metals products, for example, the extraction, refining, transportation, storage, financing, transacting and marketing of Gold, Silver, Platinum and Palladium. The Code is written with this diversity in mind so that it can apply to all wholesale Precious Metals Market Participants, including sell-side and buy-side entities, operators of trading venues and other entities providing brokerage, execution and settlement services. While there can be no universal “one size fits all” approach given the diversity of the market, the Code is intended to establish a common set of best practice for responsible participation in the Precious Metals Market.

1.2.2

For the purposes of this document, a “Market Participant” is a person or organisation (irrespective of its legal form) that is involved in the global OTC wholesale trading market for Precious Metals. As a guide, it is expected that this Code would generally apply to the relevant Precious Metals activity of:

• LBMA Members;
• Physical market (including but not limited to):
  • Refiners;
  • Mining companies;
• Logistics firms;
• Fabricators;
• Jewellery companies.
• Financial institutions (including but not limited to):
  • Banks;
  • Asset/fund managers;
  • Exchange Traded Funds;
  • Firms running high-frequency trading strategies;
  • Brokers, investment advisers, aggregators and analogous Intermediaries/Agents);
• Trading houses;
• Central banks;
• Sovereign wealth funds;
• Affirmation and settlement platforms;
• Benchmark Administrators.

1.2.3

As a guide, the following would not generally be expected to engage in Precious Metals activities as wholesale Market Participants:

• Non-tradeable and tradeable price streaming platform providers;
• Private banking Clients trading as individuals or via personal investment vehicles; and
• The general retail public.

1.2.4

For the avoidance of doubt, if Precious Metals are traded on a regulated trading venue, such as an exchange, then it is expected that Market Participants undertaking these transactions at that venue will comply with its rulebook. In the event that there is a divergence between exchange rules and regulations and this Code, then the exchange rules and regulations will apply.

1.3 How will the Code be applied?

1.3.1

The details of how the Code will apply to Market Participants will depend on their underlying activities. It is, however, mandatory for all LBMA/LPPM Members to commit to implementing the requirements of the Code. Each LBMA/LPPM Member will need to apply the Code proportionally to its business activities. In order to support the aforementioned commitment to implementing the requirements of the Code, Market Participants are expected to ensure that training and communications for their staff are consistent with the guidelines of the Code.

1.3.2

Proportionate application does not mean different standards for different institutions – it is a recognition of the differing levels of size, complexity, nature of engagement and sophistication of Market Participants in the Precious Metals Markets worldwide.