A Guide to the Loco London Precious Metals Market
Given the variety of products provided by members of the market, and in order to avoid the problems inherent in a multiplicity of bilateral agreements to cover the transactions involved, the LBMA, and where appropriate assisted by LPMCL, has developed and introduced a number of standard agreements.
These cover the terms and conditions for operating allocated and unallocated accounts as well as forward, option and gold interest rate derivative transactions.
The major advantage of standard documentation is that it defines market practice. Its utilisation by Members of the LBMA avoids the need to continually check the terms involved in bilateral agreements, and its broad acceptance also provides comfort to clients of the market. By its nature it sets standards for the terms under which transactions are conducted and so provides confidence to users of market products.
The following standard documentation is currently available:
The 1994 International Bullion Master
This is an agreement which gives a common set of terms reflecting best market practice for spot and forward bullion transactions and options, providing for the closing out and netting of outstanding bullion transactions between the parties in the event of default by one of them. As such, it is a single-product netting agreement. It is in a form that may be executed between the parties or, if not executed and one party is acting through an office in the UK, will be presumed to apply if no other bilateral documentation has been signed between the parties.
Copies of the IBMA may be obtained in print format only from the LBMA – this publication is not available electronically. There is a charge if you are not an LBMA member. Please contact the LBMA if you are interested in obtaining a copy.
The 1997 ISDA Bullion Definitions
The LBMA co-operated with the International Swaps and Derivatives Association to produce these definitions. They are designed to incorporate bullion transactions within the netting provisions of business conducted under an ISDA Master Agreement. They enable bullion transactions to be incorporated into the cross-product netting of the broad range of products traded between international institutions. Where parties are signatories to ISDA, the terms of the 1997 Bullion Definitions may be applied by being incorporated into the confirmations of each transaction.
Standard Forms of Confirmation for IRS and FRA Transactions
These were also developed in conjunction with ISDA and represent stand-alone agreements or confirmations that bring these derivative products under the provisions of the 1992 ISDA Master Agreement.
The above information is available on the LBMA’s website.
The ISDA Bullion Definitions and the Standard Forms of Confirmation for IRS and FRA transactions are not available from the LBMA. Further information is available on the ISDA website.
14. Physical Metal
Until 2008, the physical business – which was mainly gold related – relied more or less wholly on supplying those countries that had traditional domestic consumer business