LBMA review to consider creation of London gold trading exchange
By Jan Harvey
LONDON (Reuters) - The London Bullion Market Association has commissioned consultancy EY to review the London gold market and recommend further developments, it said on Monday, including the possibility of creating an exchange for gold trading in the city.
The study by EY, formerly known as Ernst&Young, will look into a range of options to benefit the bullion market within the remit of enhancing liquidity and transparency, the LBMA said.
It would "consider the current structure of the market, and whether it's possible to move from an over-the-counter market as we have got at the moment, to other options such as an exchange," a spokesman for the LBMA said. "But that is likely to be a longer term development."
It expects to receive the report in the summer.
It comes ahead of the Fair and Effective Markets Review (FEMR) report on fixed income, commodities and currency trading (FICC) markets in June.
"The aim of this strategy work is to identify opportunities for market efficiency and evolution, while increasing transparency and liquidity in line with the FEMR," the LBMA said in a statement.
The FEMR was launched last year by regulators and the British government, worried revelations about the rigging of interest rate and currency market benchmarks would undermine London's role as a financial centre.
LBMA Chief Executive Ruth Crowell said in a Reuters interview last month that the association believes the gold industry is ready for wholesale reform, including a tailor-made mechanism to report daily turnover and potential clearing following a 2014 shake-up of benchmarks.
Regulatory scrutiny of the way the precious metals benchmarks, known as "fixes", and other commodity benchmarks were set increased after the Libor scandal in the foreign exchange markets.
Banks involved in the benchmark-setting processes ceased to administer gold, silver, platinum and palladium fixes last year. InterContinental Exchange now runs the London Gold Price, while the London Metal Exchange operates the London platinum and palladium benchmarks.
CME Group and Thomson Reuters administer an electronic silver price benchmark.
(Reporting by Jan Harvey; Editing by Veronica Brown and Susan Thomas)
