25. Annexes

A Market Participant that transacts on behalf of and for the account of a Client.

An interest that a Market Participant might have to transact in a given product at a price that may be better than the prevailing market rate.

Includes LBMA Gold Price, LBMA Silver Price, LBMA Platinum Price, LBMA Palladium Price.

The methodology used to determine the Benchmark, for example, but not limited to, an auction.

Market Participants making requests, placing orders and subsequently executing trades through a dealer.

Information that is treated as confidential, including Precious Metals Trading Information and Designated Confidential Information:

Precious Metals Trading Information. This can take various forms, including information relating to the past, present and future trading activity or positions of the Market Participant itself or of its Clients, as well as related information that is sensitive and is received or produced in the course of such activity. Examples include but are not limited to:

• details of a Market Participant’s order book;
• other Market Participants’ Axes;
• spread matrices provided by Market Participants to their Clients; and
• orders for and during the Benchmark Process.

Confidential, proprietary and other information for which Market Participants may agree to a higher standard of non-disclosure, which at their discretion, may be formalised in a written non-disclosure or similar confidentiality agreement.

The spread or charge that may be included in the final price of a transaction in order to compensate the Market Participant for a number of considerations, which might include risks taken, costs incurred and services rendered to a particular Client.

A view shared by Market Participants on the general state of and trends in the market

A Market Participant that has been granted the status of Market Maker by the LBMA.

A counterparty instructs a Market Participant to execute a Precious Metals transaction at the current available level. A Market Order is placed without any limit price, and the entire order is executed at a fair and transparent price and in a reasonable time frame.

Entity participating in the wholesale Precious Metals market.

Where staff deal for their personal or indirect benefit (e.g. for their immediate family members or other close parties).

In the context of this Code, this term refers to gold, silver, platinum,and platinum.

The global set of principles for good practice in the wholesale Precious Metals market.

Can take various forms, including information relating to the past, present and future trading activity or positions of the Market Participant itself or its Clients, as well as related information that is sensitive and is received in the course of such activity.

Hedging of an expected Client transaction.

A Market Participant that transacts for its own account.

Responsible Sourcing requires Market Participants to have management systems and controls in place to address identified risks in the supply chain. This includes the LBMA Responsible Gold Guidance (RGG), based on the OECD Due Diligence Guidance, as well as the US and Swiss Know Your Client, Anti-Money Laundering and Combating Terrorist Financing regulations.

A contingent order, which triggers a buy or sell order for a specified notional amount when a reference price has reached or passed a predefined trigger level. There are different variants of Stop Loss Orders, depending on the execution relationship between counterparties, reference price, trigger and nature of the triggered order. A series of parameters are required to fully define a Stop Loss Order, including

the reference price, order amount, time period and trigger, etc. Inappropriately trading to trigger or defend Stop Losses or option

barriers is prohibited.

These accounts are opened when a customer requires metal to bephysically segregated and needs a detailed list of bar weights and assets. The Client has full title to this metal, with the Dealer holding it on the Client’s behalf as custodian.

Represents the actual quantity of Precious Metals in a bar. For example, a Good Delivery Bar may have a gross weight of 403.775 ounces. If it were of a fineness of say 996.4 fine, the fine Gold content or net weight of Gold would be 403.775 x 0.9964 = 402.321 fine ounces.

This could be for a simple purchase or sale of metal for settlement beyond spot, an outright forward or for forward swap transactions. Forward swaps are a simultaneous purchase and sale in which one leg of the transaction is generally for spot value and the other forward, conducted at an agreed differential to the spot leg of the deal. This leads to the terms “borrowing on the swap”, in the case where the spot is purchased and the forward sold, or “lending on the swap” where the spot is sold and the forward purchased, in order to differentiate from leasing metal.

Precious Metals may be placed on deposit, borrowed, leased or lent on unallocated or allocated terms.

Refers to Precious Metals that are physically held in London and comply with LBMA or LPPM Good Delivery standards.

Refers to Precious Metals that are physically held in Zurich and comply with LBMA or LPPM Good Delivery standards.

The basis for settlement and delivery of the Loco London quotation is for delivery of a standard Good Delivery Bar at the London vault nominated by the Dealer who made the sale.

While settlement or payment for a transaction will generally be in US dollars over an account in a New York bank, delivery of metal against transactions in Gold and Silver are in made in a number of ways. These include physical delivery at the vault of the Dealer or elsewhere, by credit to an allocated or unallocated account with the Dealer or through the London Precious Metals Clearing to the unallocated account of any third party.

The physical settlement of a Loco London/Zurich Platinum trade is a plate or ingot conforming to the following specifications:

• Weight: minimum permitted weight is 1 kilogram (32.151 troy ounces) and the maximum permitted weight is 6 kilograms (192.904 troy ounces)
• The gross weight of a plate or ingot if expressed in grams should be shown to one decimal place; if expressed in kilograms shown to four decimal places; and if expressed in troy ounces shown to three decimal places. Weights should never be rounded up.
• Fineness: the minimum acceptable fineness is 99.95 per cent.

The physical settlement of a Loco London/Zurich Palladium trade is a plate or ingot conforming to the following specifications:

• Weight: minimum permitted weight is 1 kilogram (32.151 troy ounces) and the maximum permitted weight is 6 kilograms (192.904 troy ounces)
• The gross weight of a plate or ingot if expressed in grams should be shown to one decimal place; if expressed in kilograms shown to four decimal places; and if expressed in troy ounces shown to three decimal places. Weights should never be rounded up.
• Fineness: the minimum acceptable fineness is 99.95 per cent.

Both Platinum and Palladium Good Delivery plates and ingots must conform to the specifications for Good Delivery set by the London Platinum and Palladium Market Association (LPPM).

These are the lists, maintained by the LBMA for Gold and Silver, and by the LPPM for Platinum and Palladium, of refiners of Precious Metals whose standards of production and assaying are such that their bars are acceptable in settlement against transactions conducted between LBMA/LPPM members and with their Clients. The lists are widely accepted as the international Benchmark, providing the reliable standard for bars traded and delivered around the world. Assessment of applications for inclusion in the lists, together with their ongoing maintenance, is one of the core functions of the LBMA/LPPM.

The traditional unit of weight used for Precious Metals. One troy ounce is equal to 1.0971428 ounces avoirdupois. The accepted conversion factors between troy and metric are that one kilogram equals 32.1507465 Troy Ounces, and one Troy Ounce equals 31.1034768 grams.

The London Good Delivery Gold Bar. This must have a minimum fineness of 995 parts per thousand and must have a Gold content of not less than 350 and at most 430 fine troy ounces. The gross troy ounce weight is rounded down to the net lowest 0.025 troy ounce interval, but the weight in fine troy ounces is expressed to three decimal places as calculated. Bars are generally close to 400 ounces or 12.5 kilograms.

The London Good Delivery Silver Bar. This must be of a minimum fineness of 999 parts per thousand and, for bars produced after 1 January 2000, weigh between 750 and 1,100 ounces. Bars produced prior to 1 January 2000 must weigh between 500 and 1,250 ounces. The weight of bars must be expressed in multiples of 0.1 of an ounce. Bars generally weigh around 1,000 ounces.

Both Gold and Silver Good Delivery Bars must conform to the specifications for Good Delivery set by the London Bullion Market Association (LBMA).

An account where specific bars are not set aside and the customer has a general entitlement to the metal. This is the most convenient, cheapest, and most commonly used method of holding metal. The holder is an unsecured creditor.

Prices are expressed in US dollars per fine troy ounce for Gold and per troy ounce for Silver. Prices against other currencies or in units of weight other than troy ounces are available on request.

In the spot market, the standard dealing amounts between Market Makers are 5,000 fine ounces in Gold and 100,000 ounces in Silver. The usual minimum size of a transaction is 2,000 troy ounces for Gold and 50,000 troy ounces for Silver, while Dealers are willing to offer competitive prices for much larger volumes for Clients.

In the forward market, subject to credit limits, London’s Market Makers quote for at least 50,000 fine ounces for Gold swaps versus US dollars, and for at least one million ounces of Silver.

The date agreed between parties for one settlement of a transaction.

Market convention is for the interest payable on loans of Gold or Silver to be calculated in terms of ounces of metal which are converted to US dollars based on a US dollar price for the metal agreed at the inception of the lease transaction. The interest basis for Gold and Silver is a 360-day year.

Interest therefore equals: B x (R/100) x (d/360) x P. Where B is ounces of Precious Metals, R is the lease rate, d is the number of days and P is the price of Gold or Silver agreed for calculation of interest.

Market convention is for forward prices in Gold and Silver to be quoted in interest rate terms on the basis at which a Dealer will borrow or lend metal on the swap.

A Dealer therefore may quote three months forward at, say, 0.40 per cent to 0.50 per cent. This means that he will lend on the swap, i.e. sell spot and buy forward, and pay on the basis of 0.40 per cent per annum over the spot price for the forward leg, or borrow on the swap, buy spot and sell forward, and charge on the basis of 0.50 per cent per annum over the spot for the forward.

In this scenario, were the Dealer to be asked to lend on the swap at 0.40 per cent and the spot price were, say, $1265 to $1265.50, the Dealer would, in accordance with market practice, base the deal at the middle of the spread. They would therefore sell the spot at $1265.25 and buy the forward at a premium calculated as: $1265.25 x 90/360 x 0.4/100 = $1.26. The forward price would therefore equal: $1265.25 + $1.26 = $1266.51.

The outright forward purchase price is calculated as the spot bid price plus the forward swap bid and the forward sale price as the spot offered price plus the forward swap offer.