ICE Benchmark Administration (IBA) is the administrator for the LBMA Gold Price which has replaced the London Gold Fix established in 1919. The LBMA Gold Price is published twice a day by IBA and provides a benchmark price that is widely used across the globe by participants such as producers, consumers, investors and central banks.


CENTRAL CLEARING FOR THE LBMA GOLD PRICE AUCTION

From Q2 2017, subject to regulatory review, centrally cleared settlement will be available for transactions which originate from IBA’s gold auction underlying the LBMA Gold Price. This will give firms the choice of settling their trades bilaterally against each counterparty (as they currently do), or submitting their trades to clearing and settling versus the clearing house. This mechanism removes the requirement for firms to have bilateral credit lines in place with all of the other Direct Participants in the auction.

Central clearing opens the auction to a broader cross section of the market. It also facilitates greater volume in the auction.


A GOLDEN FUTURE

ICE launched a new, exchange-traded, daily gold futures contract in February 2017.

The contract is settled through unallocated loco London gold vault accounts using LBMA Good Delivery Rules.

Gold futures are available to trade on ICE Futures US and will be centrally cleared through ICE Clear US.


Methodology

IBA operates physically settled, electronic spot gold auctions at 10.30am and 3.00pm UK time providing a market-based platform for buyers and sellers to trade physical spot gold. The final auction price is published to the market as the LBMA Gold Price benchmark.

The price formation for the gold auction is in US Dollars. The final price is converted into the benchmark in multiple currencies including: Australian Dollars, British Pounds, Canadian Dollars, Euros, Onshore and Offshore Yuan, Indian Rupees, Japanese Yen, Malaysian Ringgit, Russian Rubles, Singapore Dollars, South African Rand, Swiss Francs, New Taiwan Dollars, Thai Baht and Turkish Lira.

The methodology is reviewed by the LBMA Gold Price Oversight Committee as documented in its Terms of Reference. The frequency of reviews is set by the Oversight Committee through its Calendar of Agenda Items.


Technology

The auction process is hosted on the WebICE platform which provides real-time order management, including direct order management on-screen, separation of house and client orders, live credit limit controls, full audit history, advanced Excel integration and automated notification of filled trades.


Auction Process

  1. IBA sets the starting price and the price for each round using an algorithm that takes into account current market conditions and the activity in the auction.
  2. Participants enter buy / sell orders by volume (i.e. number of ounces). The price discovery process is in USD but participants may, if they wish, request to settle in different currencies.
  3. Should the net volume of all participants fall within the pre-determined tolerance at the end of a round (i.e. the imbalance - currently set at 10,000 oz.), the auction will be complete, with all volume tradable at that price.
  4. Netting of orders is processed automatically for direct participants with all house and client orders, plus any share of the imbalance, contributing to their final net volume. This net volume is then matched against other direct participants and traded.


Handling the Imbalance

An auction can conclude with up to a 10,000 ounce difference between the entered buying and selling interest. This is referred to as the imbalance. To ensure fairness this imbalance, which is shared out among the direct participants.

ACTIVE SUPERVISION

Each auction is actively supervised by IBA staff.


Direct Participants

To qualify as a Direct Participant, a firm must have the following:

  • Ordinary Member accreditation from the LBMA
  • Individuals with appropriate experience, skill and training
  • Organisational and governance arrangements
  • Appropriate credit lines, or equivalent arrangements
  • Clearing/settlement arrangements with existing Direct Participants

Please contact ICE Benchmark Administration for more information on becoming a participant: iba@theice.com or: +44 (0)20 7429 7100

The thirteen direct participants are as follows:

  • Bank of China
  • Bank of Communications
  • China Construction Bank
  • Industrial and Commercial Bank of China (ICBC)
  • Goldman Sachs
  • HSBC Bank USA NA
  • JPMorgan Chase Bank, N.A. London Branch
  • Morgan Stanley
  • Societe Generale
  • The Bank of Nova Scotia - ScotiaMocatta
  • Toronto-Dominion Bank
  • Standard Chartered
  • UBS


INDIRECT PARTICIPANTS

The IBA Gold Auction also supports Indirect Participation.

Indirect Participation enables firms to access the front end trading platform, allowing them to manage their own orders in the auction without needing bilateral arrangements in place with all of the other Direct Participants.

Indirect Participation must be offered by a current Direct Participant to its clients. The Direct Participant will provide a credit intermediation service where it stands in the middle of any trade resulting from the auction attributable to the Indirect Participant.

Please contact your Direct Participant or ICE Benchmark Administration for more information on becoming an Indirect Participant: iba@theice.com or +44 (0)20 7429 7100.

The current Indirect Participants are:

  • INTL FCStone


Client Participation

WebICE allows participants to manage their orders in a number of ways:

  • Direct participants entering a single netted order — house and client orders can be combined into a single order per round
  • Direct participants entering multiple, separate orders — orders can be entered as separate orders, with comments in a notes field, to provide granularity and auditability within a single firm’s account
  • Clients managing their own orders (indirect participation), — direct participants can choose to provide WebICE screens to their clients, allowing them to enter orders directly into the auction (orders still route through their direct participant). Clients have the same information (aggregate bids and offers) and the same ability to manage orders as everyone else with a screen. When client orders trade, their counterparty will always be their direct participant. Clients do not share in the imbalance split.

WebICE can be configured separately for each firm to either route all client orders through the house desk, or to provide full segregation.

Providing WebICE screens to end user clients allows them to participate directly in the auction process with the same information and order management capability as direct participants.

This also simplifies separation of client and house orders by providing a full audit trail for all changes during the auction.


PUBLICATION IN MULTIPLE CURRENCIES

Once the auction is concluded, the benchmark price is published.

The benchmark is available in multiple currencies including: US Dollars, Australian Dollars, British Pounds, Canadian Dollars, Euros, Onshore and Offshore Yuan, Indian Rupees, Japanese Yen, Singapore Dollars, South African Rand and Swiss Francs. The benchmark is available both in prices per ounce and in prices per gram.

During the auction IBA publishes auction details live to re-distributors, containing the starting price of each round as well as the final aggregate bid and offer volumes entered in that round.

At the end of the auction IBA publishes the final benchmark prices as well as an Auction Transparency Report providing the aggregated details of each auction round.

Customers that aren’t direct participants in the gold auction but who wish to view the auction in real-time may request view-only access to WebICE. A monthly fee per user applies to this service. Customers that already have access to WebICE should submit a request through their WebICE administrator. Customers that do not already have access to WebICE should contact data@theice.com to put the applicable WebICE agreement in place.


Governance & Oversight

The Oversight Committee’s goal is to ensure the benchmark fulfils the needs of the market by evolving it based on market requirements and regulation. The Oversight Committee includes a diverse cross section of the market, including benchmark users, market infrastructure providers, direct participants, clients, and representation from IBA. Oversight Committee members are respected industry veterans that bring important product and market expertise to the governance process.

The Oversight Committee is responsible for overseeing the Code of Conduct (which submitters and direct participants commit to follow) and the rules and methodology surrounding the determination of the benchmark. The committee regularly reviews all aspects of the determination of the benchmark and oversees necessary changes in light of developments in regulation or market requirements. It will provide oversight for surveillance. In essence, the Committee will guide the evolution of the Code, rules and methodology to assure the benchmark’s continued integrity and long-term relevance.

The following are the current members of the Oversight Committee:

NAMECOMPANYCOMMITTEE POSITION
Grant AngwinAsahi RefiningRefining
Shekhar BhandariKotak Mahindra BankFinancial Intermediary
Tony EvansonBrink’s Global ServicesBullion / Vault
Rob HayesAngloGold AshantiMining
Finbarr HutchesonIBAAdministrator (Chairman)
Dame DeAnne JuliusIBAIndependent Non-Executive Director
Sakhila MirzaLBMABullion Market
Michel PradaIBAIndependent Non-Executive Director
Tony RicciSociété GénéraleFinancial Intermediary
Aram ShishmanianWorld Gold CouncilMining
Emma VickIBAAdministrator
Simon WeeksScotia BankFinancial Intermediary
Tim WoodDenver Gold GroupMining


Oversight Committee Meeting Minutes


Non-Publication Days

The LBMA Gold Price is not published on certain days. The following table sets out the relevant holidays for each auction, and the specific days for each year are available on the Holiday Calendars page.

Holidays: For AM Auction

HOLIDAYTYPEDEFINITION
New Year's Day Bank HolidayVariable Date1st Jan, or if that falls on a weekend, the next Monday
Good FridayVariable DateThe Friday preceding Easter Sunday
Easter MondayVariable DateThe Monday following Easter Sunday
Early May Bank HolidayVariable DateThe first Monday in May
Spring Bank Holiday / Memorial DayVariable DateThe last Monday in May
Summer Bank HolidayVariable DateThe last Monday in August
Christmas Bank HolidayVariable Date25th December, or, if that falls on a weekend, the next Monday
Boxing Day Bank HolidayVariable Date26th December, or, if that falls on a weekend, the next business day after Christmas Bank Holiday


Holidays: For PM Auction

HOLIDAYTYPEDEFINITION
New Year’s Day Bank HolidayVariable Date1st Jan, or if that falls on a weekend, the next Monday
Good FridayVariable DateThe Friday preceding Easter Sunday
Easter MondayVariable DateThe Monday following Easter Sunday
Early May Bank HolidayVariable DateThe first Monday in May
Spring Bank Holiday / Memorial DayVariable DateThe last Monday in May
Summer Bank HolidayVariable DateThe last Monday in August
Christmas EveVariable DateWhen 24th December is a business day; if not, the business day immediately preceding the 24th December
Christmas Bank HolidayVariable Date25th December, or, if that falls on a weekend, the next Monday
Christmas Bank HolidayVariable Date26th December, or, if that falls on a weekend, the next business day after Christmas Bank Holiday
New Year’s EveVariable DateWhen 31st December is a business day; if not, the business day immediately preceding the 31th December