LPMCL is at the heart of the Loco London (OTC) system, supporting the most widely traded global market for gold, silver, platinum and palladium. It is a daily clearing system of paper transfers whereby LBMA members offering clearing services utilise the unallocated precious metals accounts they maintain between each other, not only for the settlement of mutual trades, but also for third-party transfers.

These transfers are conducted on behalf of clients and other members of the market in settlement of Loco London bullion activities – always remembering of course that if a South African gold mining company were to sell metal to a bank based in Australia, for example, then this sort of trade would almost invariably settle over metal accounts in London and, hence, be a Loco London trade.

The system of utilising the unallocated metal accounts that each clearer maintains with each other minimises the physical movement of precious metals, thus reducing costs and avoiding the security risks involved in the physical movement of precious metals.

The Loco London clearing system is overseen and managed by LPMCL, which is jointly owned and managed by those LBMA members that not only provide a comprehensive clearing service in the London market, but that also have applied for and been granted membership of LPMCL. In 2017, the LBMA assumed responsibility for the administrative functions on behalf of the LPMCL.

LPMCL has in place rules that set out the framework under which its members operate the clearing system, covering two main areas:

  • the right any LPMCL member has over any other LPMCL member to call on the unallocated account with any other LPMCL member, and
  • the timing under which instructions for transfers and allocations may be given and effected.

Calls made on unallocated accounts will be either for the purpose of:

  • physical delivery
  • to call for all or part of a credit balance to be transferred to a signatory where the caller has a debit balance, or
  • for allocation of precious metals.

Calls may be for physical, credit or balance sheet purposes. The credit purpose ensures that bullion account balances between dealers as a result of clearing activities do not breach credit limits at the end of each day. Crucially, allocated metal is not a credit risk on the institution where the account is held – it is simply an arrangement for storage. Clearly, institutions will have credit exposure to the clearing member where they maintain their unallocated account. This credit risk can be reduced, to zero if required, by the act of allocation.

Transfer instructions for members’ own purposes and for client transfers may be made until 4.00pm London time on the day of settlement, although the earlier in the day that client transfer instructions are communicated to the clearer, the better. LPMCL members then have until 4.30pm to effect transfers or call for allocation for credit purposes between themselves.

The rules put in place by LPMCL enhance the financial security of the clearing by enabling ‘netting’ of clearing activities to be set off with all other obligations between any two LPMCL members. The netting facilities are applicable for all four widely traded precious metals.


Certain members of the global OTC bullion market offer vaulting services. The updated list can be found on the LBMA’s website. They either use their own vaults for the storage of physical bullion or have the use of the storage facilities of a third-party provider. Some third-party vaults will be dedicated to the use of a single bullion clearer, whilst other vaults will be available to a number of bullion clearers and the vault’s own customers.

It is important that such third-party vault providers are able to meet LPMCL’s timing requirements regarding giving/receiving allocations or physical delivery.

The Bank of England primarily offers gold accounts to central bank customers and to certain commercial firms that facilitate, either directly or indirectly, access for central banks to the liquidity of the OTC gold market. Further details can be found on the Bank of England’s website.

In July 2017 the LBMA published for the first time the amount of gold and silver physically held in London vaults (published three months in arrears). As at end March 2017, there was 7,449 tonnes of gold valued at the time at $298 billion and 32,078 tonnes of silver valued at $19 billion.

The vaults of members used in the clearing process will primarily contain London Good Delivery bars, but coins, kilobars and so on may be also be stored in these facilities.

Costs for storage and insurance of bullion are subject to negotiation with each individual member of LPMCL.

Vault Managers

To reiterate from earlier, a good delivery bar produced by an accredited refiner only becomes and remains London Good Delivery whilst it continues to be accepted by a London vault. Thus the London vault managers act as ‘gatekeepers’ to the Loco London market.

More formally, the vault managers are precious metals experts who manage the vaults approved by the individual members of LPMCL and who have achieved LBMA Approved Weigher status. They are the gatekeepers of the London market and, hence, they play a pivotal quality control role in maintaining and sustaining the Good Delivery standards across the market as metal moves in and out of their custody. They also play a quality assurance role in terms of the product invested in by the client whose metal is placed in their custody.

To ensure the integrity of this key role, the LBMA is in the process of developing the Vault Operators Accreditation Scheme. Until this scheme is finalised, the following provisional standards apply.

Vault Operators Accreditation Scheme

The LBMA has devised a comprehensive set of vault operator competencies in conjunction with participating vaults. In combination with the Good Delivery Rules, these act as a valuable benchmark for the knowledge and skills required of vault operators. The aim of this initiative is to provide an online platform to set out the learning resources and assessment tools to help each LBMA member ensure that their vault operators meet the required standards. To provide a flexible and effective learning and assessment environment, the aim is to integrate the following components:

  • Online Managed Learning Environment – to act as the single online portal for vault staff to go through the programme, which will allow managers and external assessors to access and track the vault operator’s progress through the whole learning and assessment experience.
  • The ability to upload evidence of operators meeting the competencies.
  • E-learning modules to provide learning and guidance to help those undertaking the course acquire core knowledge to underpin their role as vault operators in line with the LBMA’s and the market’s standards.
  • Multiple-choice tests designed to check operators’ knowledge on each topic.
  • Guidance for managers on the knowledge to be tested and how to help vault operators gain the required knowledge.

Ultrasonic testing of a gold bar