Written on: 1 March 2022

1 March 2022 – The FICC Markets Standards Board (“FMSB”) today publishes the final Standard for the Conduct of Participants in LBMA Precious Metal Auctions.
LBMA Auctions establish prices in certain precious metals that are used as benchmark reference prices. Participants in LBMA Auctions submit bids and offers on behalf of clients wishing to buy or sell the relevant metal (Client Orders) and are also able to submit bids and offers for themselves (House Orders). It is understood that certain participants in an LBMA Auction may not be submitting House Orders due to concerns around the management of regulatory and conduct risks associated with:

(i) sourcing liquidity through an auction process which sets the LBMA Precious Metal Price; or
(ii) managing both Client Orders and House Orders in the LBMA Auctions.

This Standard, through its five Core Principles, clarifies the way in which those risks can be managed to increase the volume of bids and offers submitted to LBMA Auctions and improve the quality of price discovery resulting from them, thereby improving the effectiveness of the market.

FMSB published the Standard as a Transparency Draft on 12 October 2021, making some minor wording changes and additions to the Explanation section in response to feedback in the comments period.

This is the ninth Standard produced by FMSB.

Myles McGuinness, CEO of FMSB said: “This Standard should help to increase the liquidity available in LBMA Auctions, thereby enhancing the effectiveness of the market. We would like to thank Vincent Domien from HSBC and Tony Kim from Goldman Sachs, who co-chaired the working group which developed this Standard, as well as the members of that group.”

David Tait, CEO of The World Gold Council, and Chair of the FMSB Precious Metals Working Group said: “Following on from the recently published Spotlight Review on Precious Metals Market Structure, this Standard further demonstrates the commitment of the FMSB and its members to the continuous improvement of the Precious Metals Market.”

Ruth Crowell, CEO of the LBMA said: “LBMA welcomes the publication of the FMSB Standard for the Conduct of Participants in LBMA Precious Metal Auctions. We were pleased to participate in the constructive and practical industry discussions that resulted in this Standard.”

Tim Bowler, President at ICE Benchmark Administration said: “ICE Benchmark Administration (IBA) plays an important role in operating the auctions that set the LBMA Gold and Silver prices and was therefore delighted to work with the FMSB on this Standard.”

David Mears, Vice President, Market Structure at LME said: The LBMA Platinum and Palladium Price Auctions (LPP Auctions), administered by the LME, play a crucial role in the platinum and palladium markets. Having been closely involved in the development of this Standard, we welcome its publication, which seeks to formalise common market practice and encourage positive behaviour in respect of price discovery.”

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Notes to Editors
1) The Fixed Income, Currencies and Commodities Markets Standards Board (‘FMSB’) is practitioner led, funded by members and operated by the major participants in wholesale markets to improve standards of conduct in wholesale fixed income, currencies and commodities (FICC) markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Ensuring that wholesale FICC markets are transparent, fair and effective for all participants is at the heart of FMSB’s mission.
FMSB Standards set out Core Principles and accompanying guidance on the most important aspects of practice where ambiguity risks undermining the transparency, fairness and effectiveness of markets.
FMSB Statements of Good Practice set out clear expectations and guidance on good practice in relation to broader areas of uncertainty in wholesale FICC markets.
FMSB Spotlight Reviews encompass a broad range of publications used by FMSB to illuminate important emerging issues in FICC markets. Drawing on the insight of members and industry experts, they provide a way for FMSB to surface nascent challenges market participants face and may inform topics for future work. Spotlight Reviews will often include references to existing law, regulation and business practices. However, they do not set or define any new precedents or standards of business practice applicable to market participants.
All FMSB publications are available at fmsb.com/our-publications/.

2) Setting up the FMSB was one of the main recommendations from the Fair and Effective Markets Review (FEMR), conducted by HM Treasury, the Bank of England, and the Financial Conduct Authority in 2015.
FEMR set FMSB four strategic goals:
i) Identifying global market vulnerabilities through scanning the horizon for emerging business practice risks.
ii) Developing best market practice through the production of standards and other materials that create a common understanding.
iii) Driving global adherence through ensuring standards are comprehensible and practical.
iv) Developing consistent approaches to market practices through identifying gaps and inconsistencies in existing regulatory standards and working with other standards setting bodies.

3) FMSB has a Standards Board drawn from senior executives from across wholesale markets, from corporate clients, asset managers, sell-side participants and intermediaries and infrastructure providers such as exchanges and custodians. In specialist, focused committees, subcommittees and working groups, industry experts debate issues and develop FMSB Standards and Statements of Good Practice and undertake Spotlight Reviews that are made available to the global community of FICC market participants and regulatory authorities.

4) FMSB members bring together sell-side investment banks, buy-side asset managers, market infrastructure providers and exchanges, custodians and users of the market such as corporates. This constitution is unique.
The member firms are listed at fmsb.com/who-we-are/

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