Today the London Metal Exchange (LME) and the World Gold Council (WGC) jointly announced (here and here) the launch next year of standardised gold and silver spot and futures contracts which will trade on the LME’s electronic platform LMESelect, will clear on the LME central clearing platform LME Clear, and that will be settled ‘loco London’. Together these new products will be known as ‘LMEprecious’ and will launch in the first half of 2017.
However, although these contracts are described by the LME as delivery type ‘Physical’, settlement of trades on these contracts merely consists of unallocated gold or silver being transferred between LME Clear (LMEC) clearing accounts held at London Precious Metals Clearing Limited (LPMCL) member banks (i.e. paper trading via LPMCL’s AURUM clearing system).
London Metal Exchange: LMEprecious Gold contracts – “unallocated gold” delivery through LPMCL members https://t.co/F9BOUCjh3K
For example, the contract specs for the LME’s planned spot gold trading state that the LME’s proposed settlement procedure is one of:
“Physical settlement two days following termination of trading. Seller transfers unallocated gold to LMEC account at any LPMCL member bank, and buyers receive unallocated gold from LMEC account at any LPMCL member bank”
The range of LME contracts for both gold and silver will consist of a trade date + 1 contract (T+1), aptly named TOM, as well as daily futures from T + 2 (equivalent to Spot settlement) out to and including all trade dates to T + 25. Beyond the daily futures, the suite of contracts also includes approximately 36 monthly futures contracts covering each month out to 2 calendar years, and then each March, June, September and December out to 60 calendar months. The LME / WGC press release also mentions plans for options and calendar spread products based on these futures.
As well as trading electronically on LMESelect, these precious metals futures will also be tradeable via telephone market (inter-office market). Trading hours for the daily contract (TOM) will be 1am – 4pm London hours, while trading hours for all other contracts will be 1am – 8pm London hours, thereby also covering both Asian and US trading hours. Detailed contract specs for these gold and silver contracts are viewable on the LME website. The trading lot size for the LME gold contracts will be 100 ozs, which is significantly smaller than the conventional lot size of 5000 -10,000 ozs for gold trading in the London OTC market (and conventional OTC minimum of 1000 ozs of gold). The planned lot size for the LME’s silver contracts is 5000 ozs, again below the conventional lot size of 100,000 – 200,000 ozs for silver trading in the London OTC market (and conventional OTC minimum of 50,000 ozs of silver).
These LME contracts are being pitched as a real alternative to the incumbent over the counter system of gold and silver trading in London which is overseen by the London Bullion Market Association, an association whose most powerful members are the clearing and vaulting banks in London, namely HSBC, JP Morgan, Scotia, and to a lessor extent UBS and Barclays, but increasing ICBC Standard bank as well. But given that the LME’s clearing will sit on top of the LPMCL clearing system and use unallocated transfers, the chance of any real change to the incumbent London gold and silver market is non-existent. Nor will the trading of these LME products give any visibility into the amount of physical gold and silver that is held within the London Market, nor the coverage ratio between ‘unallocated account’ positions and real underlying physical metals.
Five Supporting Banks
This new LME / WGC initiative is being supported by 5 other investment banks and a trading entity called OSTC. These bank backers comprise US banks Goldman Sachs and Morgan Stanley, French banks Natixis and Société Générale, and Chinese controlled bank ICBC Standard Bank. According to a Reuters report about the launch, the World Gold Council had approached 30 firms about backing the launch, so with only 5 banks on board that’s a 16.6% take-up ratio of parties that were approached, and 83.4% who were not interested.
Earlier this year in January, Bloomberg said in a report said that the five interested banks were “ICBC Standard Bank Plc, Citigroup Inc., Morgan Stanley, Goldman Sachs Group Inc. and Societe Generale SA“, so somewhere along the line Citigroup looks to have taken itself off the list of interested parties, while Natixis came on board. The World Gold Council’s discussions about a proposed gold exchange and its discussions with ‘5 banks’ appear to have begun as early as the 4th quarter of 2014 and were flagged up by the Financial Times on 02 April 2015, when the FT stated that:
“The WGC has hired a number of consultants and spent the past six months pitching a business case for banks to consider the alternative trading infrastructure”
“The World Gold Council…and at least five banks are participating in initial discussions”
Notably, this was around the time that LME found out it had not secured the contracts to run either the LBMA Gold Price or LBMA Silver Price auctions. Note, that all 5 of the LME supporting banks, i.e. Goldman, ICBC Standard, Morgan Stanley, SocGen and Natixis, are members of the London Bullion Market Association (LBMA), with Goldman, Morgan Stanley, ICBC Standard and SocGen being LBMA market members, and Natixis being a full member of the LBMA. Goldman, Morgan Stanley, ICBC Standard and SocGen are also direct participants in the LBMA Gold Price auction operated by ICE Benchmark Administration. None of these 5 banks are direct participants in the LBMA Silver Price auction. Notably, none of these banks except for ICBC Standard is a member of the precious metals clearing group LPMCL. ICBC Standard Bank also recently acquired a precious metals vault in London from Barclays and also joined the LBMA’s Physical Committee (see BullionStar recent blog ‘Spotlight on LPMCL: London precious MEtals Clearing Limited‘ for details). Therefore, ICBC Standard seems to have a foot in both camps.
Unallocated Balances, Unsecured Creditors
Given the long build-up to this LME / World Gold Council announcement, and the fact that these LME spot and futures products were supposed to be a genuine alternative to the LBMA bank controlled OTC trading system, the continued use of unallocated settlement and the use of LPMCL accounts by these planned LME contracts underscores that the LME contract do not represent any real change in the London Gold and Silver Markets.
As a reminder, the resulting positions following transfers of unallocated gold and silver through the LME Clear accounts of LPMCL members essentially means the following, in the words of none other than the LBMA:
“Unallocated account basis. This is an account where the customer does not own specific bars, but has a general entitlement to an amount of metal. This is similar to the way that a bank account operates”
“settled by credits or debits to the account while the balance represents the indebtedness between the two parties.”
“Credit balances on the account do not entitle the creditor to specific bars of gold or silver or plates or ingots of platinum or palladium but are backed by the general stock of the precious metal dealer with whom the account is held:the client in this scenario is an unsecured creditor.
Alternatively, a negative balance will represent the precious metal indebtedness of the client to the dealer in the case where the client has a precious metal overdraft facility.
Should the client wish to receive actual metal, this is done by “allocating” specific bars, plates or ingots or equivalent precious metal product, the metal content of which is then debited from the unallocated account”.
LME bows to LPMCL
However, it should come as no surprise that these LME spot and futures contracts haven’t taken a new departure away from the entrenched monopoly of the London gold and silver clearing and vaulting systems, for the LME specifically stated in quite a recent submission to the LBMA that it will never rock the boat on LPMCL’s AURUM platform. When the LME presented to the LBMA in October 2014 in a pitch to win the contract for the LBMA Gold Price auction (which it didn’t secure), the pitch said that a centrally cleared solution “would only be introduced with market support and respecting LPMCL settlement“. [See right-hand box in below slide]:
In the same pitch, the LME also stated that:
“LME Clear fully respects existing loco London delivery mechanism and participants“
[See bottom line in below slide]:
Interestingly, following the announcement from the LME and the World Gold Council, the LBMA provided a very short statement that was quoted in the Financial Times, that said:
“The LBMA saw the announcement with interest and reconfirms it has no direct or indirect involvement in this project”.
While that may be true, what the LBMA statement didn’t concede is that 5 of its member banks, 4 of which are LBMA market makers, do have a direct involvement in the LME / World Gold Council project. Nor did the LBMA statement acknowledge that settlement of the planned LME gold and silver contracts will use the LPMCL infrastructure, nor that the LPMCL is now in specific scope of the LBMA’s remit.
“the London Precious Metals Clearing company took part not only [in the LBMA] review, but we have now agreed to formalise our working relationship, with the LBMA providing Executive services going forward. I’m grateful to the LPMCL directors for their leadership and their support for removing fragmentation from the market.”
With the LME contracts planning to use LPMCL, this ‘new dawn’ view of the LME / World Gold Council initiative is in my view mis-guided.
Even COMEX has more Transparency
Anyone familiar with the rudimentary vaulting and delivery procedures for gold and silver deliverable under the COMEX 100 oz gold and 5000 oz silver futures contracts will know that at least that system generates vault facility reports that specify how much eligible gold or silver is being stored in each of the designated New York vaults, the locations of the vaults, and also how much of the eligible gold or silver in storage has warehouse warrants against it (registered positions). The COMEX ‘system’ also generates data on gold and silver deliveries against contracts traded.
However, nothing in the above planned LME contract specs published so far gives any confidence that anyone will be the wiser as to how much gold or silver is in the London vaults backing up the trading of these spot and future contracts, how much gold or silver has been converted post-settlement to allocated positions in the vaults, nor how much gold or silver has been delivered as a consequence of trading in these spot and futures contract, nor importantly, where the actual participating vaults are.
This is because the LMPCL system is totally opaque and there is absolutely zero trade reporting by the LBMA or its member banks as to the volumes of gold and silver trading in the London market, and the volumes of physical metals held versus the volumes of ‘metal’ represented by unallocated account positions. Furthermore, the LBMA’s stated goal of introducing trade reporting looks as dead as a dodo, or at least as frozen as as a dodo on ice.
LBMA stall on Trade Reporting, LPMCL clear as Mud
On 9 October 2015, the LBMA announced that it had launched a Request for Information (RFI) asking financial and technology providers to submit help with formulating solutions to deficiencies which regulators thought the London bullion market such as the need for transparency, and issues such as liquidity that had supposedly been recommended as strategic objectives by consultant EY in its report to the LBMA, a report that incidentally has never been made publicly available. On 25 November 2015, the LBMA then announced that it had received 17 submissions to its RFI from 20 entities spanning “exchange groups, technology firms, brokers and data vendors”.
On 4 February 2016, the LBMA then issued a statement saying that it was launching a Request for Proposals (rRfP) and inviting 5 of these service providers (a short-list) to submit technical solutions that would address requirements such as an LBMA data warehouse and that would support the introduction of services such as trade reporting in the London bullion market. The RfP statement said that the winning service provider would be chosen in Q2 2016, with a planned implementation in H2 2016.
However, no progress was announced by the LBMA about the above RfP during Q2 2016, nor since then. The only coverage of this lack of newsflow came from the Bullion Desk in a 27 May article titled “Frustration Grows over London Gold Market Reform” in which it stated that the 5 solution providers on the short-list were “the LME, CME Group, the Intercontinental Exchange (ICE), Autilla/Cinnobar and Markit/ABS“, and that:
“the pace at which the LMBA is moving forward are causes for consternation in some quarters of the sector”
A quote within the Bullion Desk article seems to sum up the sentiment about the LBMA’s lack of progress in its project:
“It’s not going to happen any time soon. Look at how long it’s been going on already,” another market participant said. “Don’t hold your breath. It seems like we still have a long way to go.”
What could the hold up be? Surely 17 submissions from 20 entities that were whittled down to a short-list of 5 very sophisticated groups should have given the LBMA plenty of choice for nominating a winning entry. Whatever else this lack of progress suggests, it demonstrates that increased transparency in London gold and silver market trading data is not going to happen anytime soon, if ever.
Furthermore, the opacity of the London clearing statistics that are generated out of the LPMCL clearing system need no introduction to most, but can be read about here.
According to the LBMA, ‘Loco London’ “refers to gold and silver bullion that is physically held in London“, however, given the secrecy which surrounding trading data in the London gold and silver markets, and the lack of publication by any bank about the proportion of unallocated client balances in gold or silver that it maintains versus the physical gold or silver holdings that it maintains, this ‘loco London‘ term appears to have been abused beyond any reasonable definition, and now predominantly refers to debit and credit entries in the virtual accounting systems of London based bullion banks. Nor, in my opinion, will the LME contracts change any of this. One would therefore be forgiven in thinking that the real underlying inventories of gold and silver in the London market and their associated inverted pyramid unallocated account positions are too ‘precious’ to divulge to the market. The Bank of England is undoubtedly licking its chops to the continued opacity of the market.
And its not just my opinion. This latest LME / World Gold Council / investment bank announcement has generated other skeptical reactions. The last word goes to Jim Rickards, who tweeted this in reaction to the latest LME / World Gold Council news:
“There are seven custodians offering vaulting services in the London bullion market, three of whom are also clearing members of the LBMA (Barclays, HSBC and JP Morgan). There are also four other security carriers, who are also LBMA members (Brinks, G4S Cash Solutions (UK), Malca Amit and Loomis International (UK) Ltd). The Bank of England also offers a custodian service (gold only).”
These 8 custodians are then listed in a pdf document on the LBMA website with their head office addresses, but not the vault addresses. So where are the actual vaults?
“The London-based Malca-Amit vault is conveniently located close to Heathrow airport. The vault is graded at level XII CD EX, the highest European Vault classification and is complemented by the most up to date security systems including the Avigilon CCTV suite with cameras capturing 29 megapixels per frame.
The vault is authorised by the members of the London Clearing Company and has LBMA approval for the weighing and inspecting of precious metals.“
Notice the reference to London Clearing Company. This is a reference to the London Precious Metals Clearing Limited (LPMCL), a private precious metals clearing consortium comprising HSBC, JP Morgan, Barclays, The Bank of Nova Scotia – ScotiaMocatta, and UBS.
Driving around in Circles?
The London Bullion Market Association (LBMA) actually featured Malca-Amit’s London vault in a slightly tongue in cheek article by Aelred Connelly titled “Visit to Malca-Amit’s New Vault” which appeared in Issue 68 of the LBMA’s Alchemist magazine in October 2012.
The article begins:
“It was a balmy day when we arrived at Feltham station where we were warmly greeted by our host for the day, Allan Finn, Global Commodities Director for Malca-Amit. Allan told us that the location of the vault was top secret so he deviously drove his car round in circles until we were so disorientated we had no idea where he had taken us.”
And ends with:
“Our tour came to an end. Allan drove his car round in circles again until we were so disorientated that we didn’t know where we had come from. But he made up for it by taking us for a nice lunch on the river at Richmond.
Apart from driving around in circles between Feltham Station and the vault destination, the article also tells us that:
“Malca-Amit became a member of the LBMA in March 2012 and shortly afterwards completed the building of a new vault facility close to Heathrow airport…..
…the new secure storage facility was opened in April 2012 near Heathrow airport.“
So it seems that Malca-Amit was granted Ordinary membership status of the LBMA just prior to its new vault becoming operational. The granting of Ordinary membership was probably a precursor to the Malca-Amit vault being, in the words of Malca-Amit, “authorised by the members of the London Clearing Company ..[with].. LBMA approval for the weighing and inspecting of precious metals.”
The LBMA Alchemist profile goes on to say:
“Built above ground, the Malca-Amit vault is one of a number of new facilities that either have been built or which will be opened shortly within the perimeter of the M25….. Proximity to an airport is an advantage.“
“When we eventually arrived at our destination only the sound of planes overhead gave any indication as to where we were.”
“Before we went in to the building Allan explained that the perimeter fencing can withstand a 7.5-ton vehicle at 50 mph and the internal shutter anti-ram barrier which is located behind the entrance gates can withstand a 7.5-ton vehicle at 30 mph.”
“But the thing that strikes you most is the vault. Allan explained that it is a Chubbsafe grade XII which offers the highest possible level of security and provides capacity for more than 300 metric tonnes of gold and 1,000 tonnes of silver.“
“Gold and silver are not the only precious items in storage: there are also diamonds and other precious stones and jewellery which are kept in storage on behalf of clients.”
Where then could Malca-Amit’s recently opened gold and silver vault be located?
Arena Building, Parkway
It turns out that in a similar manner to G4S when it made a planning application amendment for its new vault building at Abbey Road in Park Royal, Malca-Amit was also not shy of listing its building location on the internet, for it too listed the location of its new vault in a planning application amendment submission dated July 2013.
(0 vehicle(s), 0 trailer(s)) New authorisation at this operating centre will be: 4 vehicle(s), 2 trailer(s)
Which leads us to the questions: what is and where is this Arena Building?
In 2011, the already completed Arena Parkway building, profiled in a glossy brochure, was marketed on a UK commercial real estate website called NovaLoca commercial property finder. This brochure pdf file was created on 14 July 2011. So although Malca-Amit may have “completed the building of a new vault facility” as the LBMA stated, it did not build the building in which the vault is located. The building had already been built prior to 2011.
The ‘Arena’ building is in the ‘Parkway Heathrow M4′ industrial estate off Cranford Lane, in Heston, in the Hounslow area to the north-east of Heathrow airport. Anyone who knows that area around Hounslow will know that the one of the landing routes into Heathrow Airport is a very low approach along a route right above where this building is located.
According to the brochure:
“The Arena provides a modern detached warehouse unit of 23,660 sq ft with a self-contained secure yard and benefits from 24-hour security, an on-site management team and surveillance cameras.”
“The unit is available on a new Full Repairing and Insuring lease basis.”
Additional information in the 2011 brochure includes such facts as:
“NEW DISTRIBUTION/WAREHOUSE UNIT 23,660 sq ft (2,198 sq m)”
Description The Arena is a new high quality warehouse suitable for production, storage, research and development, laboratories and general distribution. It has an impressive reception leading to first floor fully fitted offices. The property is constructed of brick and profile metal composite cladding with double glazed windows fitted with solar shading.
Accommodation The property provides the following approximate gross external floor areas: Warehouse 20,430 sq ft 1,898 sq m FF Offices 3,230 sq ft 300 sq m Total 23,660 sq ft 2,198 sq m
Amenities Warehouse, 8m clear height, Two up and over electric loading doors, 200 kVA 3 Phase power supply, Roof lights to 10% of warehouse floor area, Floor loading of 50Kn/m2
Offices Open plan layout, Full access raised floor, Suspended ceilings with recess lighting, Gas central heating, Double glazed windows, Passenger lift Reception area
Exterior Self-contained property, Large secure yard, Access for articulated lorries Allocated parking
Given that this Arena building was being marketed from July 2011 onwards, and that Malca-Amit began operating the vault facility from April 2012, then it would suggest, as would be expected, that Malca-Amit took possession, and then fitted out the building to its own specific requirements, including the vault, before opening for business in April 2012.
The Arena building is in the London Borough of Hounslow, so it is instructive to examine planning applications made for this building in and around the dates that Malca-Amit took occupancy.
A planning search for TW5 9QA on the Hounslow planning website reveals that plans for this Arena Parkway building were submitted from as early as December 2007, but there seems to have been a long drawn out series of planning applications and amendements made for the construction, the latest being submitted in December 2008 and approved by Hounslow Council in February 2009. Therefore, construction of the building would have commenced sometime after February 2009.
The planning applications for the Arena building, which were submitted by CGNU Life Assurance Ltd / Aviva Investors, summarise the project as follows:
“System Reference: P/2008/3669
Planning Reference: 00315/F/P59(6)
Following approval for demolition of the existing office building and construction of new industrial and warehouse unit with ancillary office accommodation, new entrances off existing access road, car parking, landscaping and roof mounted photo-voltaic panels details submitted pursuant to Condition 6 (waste and recycled materials storage) of permission dated 18/03/08
Name Mr Mark Nevitt CGNU Life Assurance Ltd
Address C/O Aviva Investors No.1 Poultry London EC2R 8EJ
The Arena drawings document submitted with the most recent building application shows a layout in keeping with the size and shape of the structure that was actually built, so it looks like the development was completed in accordance with the last approved set of plans.
Following occupancy by Malca-Amit, the only planning application submitted for the Arena Building since then is application “Planning Reference: 00315/F/P61″ which addressed improved fencing around the site.
“System Reference: P/2013/1670
Planning Reference: 00315/F/P61
Site description THE ARENA PARKWAY TRADING ESTATE CRANFORD LANE HOUNSLOW LONDON TW5 9QA
Date received 31/05/2013
Details: Erection of security fencing and bollards along perimeter of site with sliding gate at yard entrance and rising barrier at car park
Ward: Heston West [note that a ward is a sub-unit of a borough]
“The application seeks to improve the existing security around the site. The existing bollards around the site would be made good to existing low-level shrub planting. The fencing around the part of the site would be a 2.4m high 358 mesh panel fence powder 600 mm high electric fence above. This fencing would be on the north, south and west parts of the site. There would be a 6m cantilevered sliding gate, which would be 2.4m high with serrated top – RAL 9005 (black) finish.
In order to secure parking on site a car park gate has been proposed whichruns off the access road. This would be 3m wide rising barrier which wouldbe 1m high, RAL 9003 (white) finish with contrasting red banding. Therewould be 1m wide exit gate which would be next to the unit.”
The Site Plan and Elevation for the above application put some visuals on the above delegated report text. This fencing is therefore the fencing that Allan Finn of Malca-Amit was referring to when he told the LBMA that the”perimeter fencing can withstand a 7.5-ton vehicle at 50 mph and the internal shutter anti-ram barrier which is located behind the entrance gates can withstand a 7.5-ton vehicle at 30 mph.”
The Edinburgh Assay Office and UKAS
Not only is Malca-Amit located in this Arena Parkway Building, but so is the Edinburgh Assay Office. Although the Edinburgh Assay office has its headquarters in Goldsmiths Hall, Edinburgh, in Scotland, it also operates a laboratory at a Heathrow Sub Office where it is accredited for “Chemical Tests for the purpose of hallmarking”.
This fact is revealed in a series of United Kingdom Accreditation Service (UKAS) reports that were posted on the UKAS website in June 2015. On 8 June 2015, UKAS posted a report about the Edinburgh Assay Office on its website titled “The Edinburgh Assay Office Issue No: 010 Issue date: 08 June 2015″. This report lists a ‘Heathrow Sub Office’ for the Edinburgh Assay Office without specifying its address.
However, 4 days earlier on 4 June 2015, UKAS posted a report titled “The Edinburgh Assay Office Issue No: 009 Issue date: 04 June 2015” in which the Heathrow Sub Office was listed with an address of “1st Floor, Arena Parkway, Cranford Lane, Heston, TW5 9QA”.
Although the Issue 010 report from UKAS replaced its Issue 009 version a few days later, the Issue 009 version remained in the Google cache as a Google search result and also as a complete cached document:
Cached version of Issue 009
The commercial logic for the Edinburgh Assay Office having a presence in Malca-Amit’s Arena building seems to be that, in addition to Malca-Amit storing precious metals and precious stones and jewellery in the building, the location is also convenient for the rest of the Heathrow area where precious metals and jewellery are constantly arriving into and departing from. This is the ‘Hallmarking in Transit’ service offered by the Edinburgh Assay Office, offered in conjunction with Malca-Amit, and explained on the Assay Office website here, and also on Malca-Amit’s website here.
This is not the only UK-based assay office to maintain a sub-office in the premises of a secure precious metals transport and secure storage operator near Heathrow Airport. The Goldsmiths Company – Assay Office, which is headquartered in the City of London, also operates a Heathrow Sub Office in “Unit 7, Radius Park, Faggs Road, Feltham, Middlesex, TW14 0NG”. This is listed in a UKAS report “The Goldsmiths’ Company – Assay Office Issue 016 Issue Date 05 August 2014″. This ‘Unit 7 Radius Park’ is a Brinks building and it too contains a vault, but that’s another vault profile for another day.
“ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market..”
“ICBC.. has also applied to become a clearing member of the London gold and silver over-the-counter business.“
“The vault became operational in June 2014 and has a capacity of 1,500 tonnes. It was built and is managed by British security services company G4S.“
These moves by ICBC Standard Bank have now put both the G4S vault and LPMCL, (a private company), back in the spotlight.
The Background to the G4S Vault
On 20 March 2012, Deutsche Bank issued a press release announcing that it had contracted security company G4S to construct and manage a precious metals vault on Deutsche’s behalf in London. Critically, this was a substantial long-term partnership between Deutsche Bank and G4S, with G4S doing the actual work of building and then operating the precious metals vault. Deutsche stated at the time in March 2012 that the new vault would be for the exclusive use of Deutsche Bank clients, and that it would available for use by these clients during 2013:
“Deutsche Bank and G4S are pleased to announce that they are to join forcesin establishing a new vault for the storage of precious metals in the UK.”
“The new vault will be built and managed by G4S, the world’s leading international security solutions group, for the exclusive use of Deutsche Bank and its clients and will be an enhancement to Deutsche Bank’s already extensive metal trading and clearing capabilities.”
“‘It will position us well to quickly become a leading metals clearing and custody house,’commented Raymond Key, Global Head of Metals Trading at Deutsche Bank.The vault, which will be constructed and run to industry-leading standards of security, will be available for clients in 2013.“
Likewise, on 20 March 2012,G4S released its own press release in which it revealed that the contract with Deutsche Bank was a 10 year commercial deal and that discussions about building the vault had commenced in 2009:
“Working in partnership with Deutsche Bank, the business has secured a ten year commercial arrangement to establish a state of the art precious metals vault that will be built and managed by G4S, and will enable Deutsche Bank to extend and enhance their metal trading and clearing capabilities.
Discussions started with Deutsche Bank back in 2009 when increased economic volatility started to cause a rise in interest levels among investors for precious metals.”
“James Dinsdale, Managing Director, G4S Cash Solutions, said: ‘We’re delighted to have secured this partnership with Deutsche Bank….. This agreement represents a strategic move in the UK market place for G4S.”
“Clyde & Co has advised global security and logistics company G4S in relation to a project for Deutsche Bank.
G4S will build and manage a gold bullion secure storage vault in the UK for Deutsche Bank.”
What none of the press releases mentioned was that the precious metal vault was being integrated into the basement of a new G4S operating centre in Park Royal, London.
As it turns out, Deutsche did not deliver on its self-publicised deadline for the new vault becoming available to its clients in 2013. However, on 9 June 2014, over 2 years after announcing the London vault project, a much reduced Deutsche Bank London precious metals business that had substantially stepped back from the London Gold Market, confirmed to Reuters that it had finally opened its new London precious metals vault. Note that Reuters is usually the first distribution channel that the London Gold Market PR machine contacts to get its stories out on to the newswires.
“Deutsche’s new vault has been built in partnership with logistics company G4Sand is open to institutional investors, and commercial and central banks.”
“The vault has a capacity of 1,500 tonnes, making it significantly bigger than a 200-tonne storage facility that the bank owns at the Singapore Freeport.“
The period from late 2013 to early 2014 turned out to be a turbulent period for Deutsche Bank’s precious metals operations in London, during which time:
- German financial regulator BaFin began an investigation into the London Gold and Silver Fixings, of which Deutsche Bank was a fixing member (November 2013)
- Deutsche Bank announced that it would withdraw its participation in the London Gold and Silver Fixings and sell the Fixing seats (January 2014)
- Deutsche Bank ceased contributing to the GOFO benchmark and ceased being a LBMA market maker for precious metals forwards (February 2014)
- Deutsche Bank ‘failed to sell’ its gold and silver fixing seats (despite ICBC Standard Bank being interested), and Deutsche then merely resorted to withdrawing from the fixings (April/May 2014)
- Deutsche Bank’s Matthew Keen, who was a director of London Gold Market Fixing Limited (LGMFL), London Silver Market Fixing Limited (LSMFL), and London Precious Metals Clearing Limited (LPMCL) resigned from Deutsche Bank, prompting the appointment of other Deutsche representatives to those company directorships (January 2014)
- Deutsche Bank’s representative on the London Bullion Market Association’s (LBMA) management committee, Ronan Donohoe, resigned from the LBMA management committee on 5 March 2014, only 7 months into a 2 year appointment (March 2014)
Given all the above retrenchments affecting its precious metals activities in London, it is slightly odd that Deutsche Bank still went ahead in June 2014 and announced the opening, at least in name, of its London precious metals vault collaboration with G4S. Perhaps it had a contractual obligation with G4S to do so.
But odder still is that less that 5 months after announcing the opening of the new vault, Deutsche Bank then stepped back even further by closing its physical precious metals trading operation in London in November 2014, and then announced in December 2014 that it would actually be interested in selling its London gold vault. This decision is beyond bizarre given the huge level of commitment that Deutsche Bank had made to the development of the vault for at least 4-5 years beginning in 2009.
“Deutsche Bank is open to offers for its London-based gold vault following the closure of its physical precious metals business, three sources familiar with the matter said on Wednesday. ‘If the right offer came along, then the bank would sell the London vault,’ one source close to the situation said.
The German bank shut its physical precious metals trading arm last month as it further reduced its exposure to commodity markets.”
“Deutsche declined to comment on the status of its vaulting operation.“
“…it could be difficult for Deutsche Bank to find buyers among its nearest peers. But sources familiar with the matter said a Chinese entity could come forward. ICBC is trying to build a presence in London and the sources said it was a likely candidate. ICBC declined to comment.”
The key question is did this Deutsche Bank vault in London, operated by G4S, ever do any precious metals business in the time between June 2014 and November 2014? If it did, then this activity could not have been substantial.
Deutsche Bank clients holding allocated gold and other precious metals with Deutsche in London would not have been impressed if they were told their holdings were being moved to the new vault in the summer of 2014, only to find out a few months later that Deutsche was looking to exit its involvement with the vault.
While the G4S / Deutsche vault sales process seemed to remain on hold for the entire year of 2015 with no announced activity from either Deutsche bank or ICBC, and no media scrutiny, Deutsche continued to exit the physical gold business in London amid a number of other significant developments. In August 2015, Deutsche departed from the London Precious Metals Clearing Limited (LPMCL) company, leaving HSBC, JP Morgan, Bank of Nova Scotia, Barclays, and UBS as the remaining 5 members of the London gold and silver clearing consortium.
“Deutsche Bank is to sever its last link with commodity trading by resigning as a clearing member of the London gold and silver over-the-counter business..” [LPMCL]
It’s a little known fact that London Precious Metals Clearing Limited (LPMCL) (company number 04195299) is a UK private limited company with the same registered address as the London Gold Market Fixing Limited and the London Silver Market Fixing Company Limited. This registered address is C/O Hackwood Secretaries Limited, One Silk Street, London EC2Y 8HQ. Indeed, Hackwood Secretaries Limited is the Company Secretary for LPMCL. Hackwood Secretaries Limited is one of the companies Linklaters uses to offer its company sectretariat services. And Linklaters is one of the better known ‘magic circle’ global law firms that is headquartered in London.
While LPMCL has so far managed to steer clear of US class actions suits concerning precious metals manipulation accusations, its fellow Linklater registered gold and silver fixing companies, London Gold Market Fixing Limited and the London Silver Market Fixing Company Limited, both of which have had a lot of the same directors as LPMCL, have not been so lucky on the class action front, and both companies are now facing live consolidated class action suits in New York courts.
Each member bank of LPMCL usually appoints two directors who are senior staff members of that investment bank. So with 6 investment banks within LPMCL, there are usually 11-12 LPMCL directors, give or take a few people who would invariably be moving bank at any given time.
Deutsche Bank’s two last-serving directors of LPMCL, Raj Kumar and David Mitchell-Innes, actually resigned from LPMCL on 9th February and 1st September 2015, respectively. The February 2015 LPMCL resignation by Kumar seems to have been precipitated by his internal move within Deutsche Bank for a short while to the role of Global COO for Commodities, but then significantly, Kumar left Deutsche Bank in July 2015 to take up a role in ICBC Standard Bank in September 2015 as a managing director in ICBC Standard’s precious metals business, as Reuters reported on 17 September:
“London-based ICBC Standard Bank Plc named Raj Kumar head of its precious metals business development, effective immediately.
Kumar, who will be based in London, joins from Deutsche Bank AG, where he was managing director of precious metals business.”
This Deutsche Bank – ICBC Standard Bank – LPMCL link in the form of Raj Kumar was undoubtedly useful to ICBC Standard in its move to take on Park Royal vault lease from Deutsche Bank, and could help facilitate ICBC Standard’s stance in an application to become a member of LPMCL.
However, the 20 August Reuters report also interestingly stated that Standard Chartered might be interested in becoming a LPMCL member:
“…there is one other bank, Standard Chartered, that could become a gold and silver clearing member in the next few months.”
Could this be a typo by Reuters when it meant to say Standard Bank? Possibly, but most likely not. Standard Chartered is an important bank in the London Gold Market in its role as a LBMA market maker in spot and options for gold and silver which it secured in February 2015. But Standard Bank is not to be confused with Standard Chartered bank. They are two entirely separate banking institutions, albeit with historical connections.
Standard Chartered is headquartered in London, and is well-known for its emerging markets focus, particularly in Asia and Africa. The ‘Standard’ in Standard Chartered in some ways does refer to the South African ‘Standard Bank’, since Standard Chartered was created in 1969 through the merger of Standard Bank of British South Africa and Chartered Bank of India, Australia and China. However in 1987, Standard Chartered sold its shareholding in Standard Bank.
In April 2015, Reuters said of Whitehead’s pending departure from Barclays:
“Barclays’ global head of metals and mining sales Martyn Whitehead will leave the bank as part of its restructuring and exit from some parts of its commodities business, a source familiar with the situation told Reuters on Monday.
Whitehead was Barclays’ only representative listed with London Precious Metals Clearing Ltd. Barclays is one of the six banks that organise and co-ordinate bullion clearing and vaulting in London.”
Therefore, could two former directors of LPMCL, namely Raj Kumar and Martyn Whitehead, now be spearheading applications on the part of their respective new employers, ICBC Standard Bank and Standard Chartered, to both join the private club that is London Precious Metals Clearing Limited, and have access to the exorbitant privilege of being part of the London Gold Market’s private gold clearing consortium, and preferential treatment form the Bank of England gold and foreign exchange desk?
China’s largest bank, Industrial and Commercial Bank of China (ICBC), has been eager to become a premier player in the London Gold Market for some time now. Although it became an Ordinary Member of the LBMA in 2012, ICBC had stated in 2012 its desire to become a LBMA Market Making Member. ICBC was also interested in buying Deutsche Bank’s seat in the old Gold Fixing in 2014, but strangely this sale never happened. See my BullionStar blog “Chinese Banks as direct participants in the new LBMA Gold and Silver Price auctions? Not so fast!” from March 2015 under section “ICBC and Standard Bank” for more details on this.
ICBC also stated in June 2015 that it wanted to become a direct participant in the LBMA Gold Price auction, but again strangely this has not yet happened despite 2 other Chinese banks, namely Bank of China and China Construction Bank (CCB), eventually being authorised by the LBMA to join up to the LBMA Gold Price auction on 22 June 2015 and 30 October 2015, respectively.
Prior to the controlling interest purchase by ICBC, Standard Bank was no stranger to London Gold Market gold vaulting, and a 2009 report from Abu Dahbi’s “The National” on United Arab Emirates related bullion stated that gold had:
“moved to the vaults of Standard Bank of South Africa, located in the London offices of JPMorgan Chase at 60 Victoria Embankment, Blackfriars, London.”
The ‘vaults of Standard Bank‘ reference just refers to allocated or sub-leased space in the JP Morgan vault in London in the name of Standard Bank of South Africa.
Finally, ICBC also has a strategic interest in the London platinum group metals market through Standard Bank Plc’s existing participation in the London Platinum and Palladium Market especially through the daily platinum and palladium fix auctions, which are now administered by the LME on behalf of the LBMA.
The Park Royal VAULT
As first revealed by Zerohedge in December 2014, the London precious metal vault that was built by G4S on behalf of Deutsche Bank is located at in the Park Royal area of London at 291 Abbey Road, London NW10 7SA.
This Park Royal location was actually telegraphed by G4S itself as early as July 2013 when ‘G4S Cash Solutions’ advertised for “Precious Metals Vault Officers” for the new vault in a job advert on the careers section of its own website, which listed the job location as ‘Park Royal, West London‘. Not really a very security conscious approach for whats purports to be one of the world’s foremost security companies. The job adverts included the following:
“Precious Metals Vault Officers
Location: Park Royal, West London
Number of Positions:16
Closing Date: November 2, 2013
G4S Cash Solutions, in partnership with one of the world’s leading financial institutions, is launching a Precious Metal Vault in West London. The vault which has been created with innovative, state of the art design and technology is at the leading edge of the global bullion storage industry.
We are now recruiting an exceptional team of Precious Metal Vault Officers who will operate and secure our vault in this exciting, new venture.”
“responsible for processing all inbound, outbound and stock management transactions and movements of Precious Metals”
“The operation and use of a Vault Management System together with specialist Precious Metals equipment”
“The conduct of receipting, weighing and stowing of Precious Metals including their physical movement in and around the Vault “
“G4S is the largest secure solutions company in the world…Our Cash Management Solutions business has expertise in cash and valuables transportation, cash processing, ATM and cash centre outsourcing, secure storage and retrieval.”
“Responsible for the management, security and operations of the precious metals vault including security and traceability of all assets entering and leaving the vault.”
“To work closely with internal management on the strategic global growth of our bullion projects; offering product, operational knowledge and LBMA expertise.”
“To train vault officers to ensure they are working within the LBMA / LPPM / LPMCL guidelines…”
A strong working knowledge of LBMA, LPPM and LPMCL codes of practice and proven experience of implementation of these codes
** Proven experience of working within a Precious Metal vault **
Proven experience of working within LBMA, LPPM and LPMCL codes of practice (including weighing of bullion)”
Planning and implementing the conduct of receipting, weighing and stowing of precious metals including their physical movement in and around the vault
Planning for and implementing the conduct of picking, packing and shipping of precious metals including their physical movement in and around the vault
There were also similar job adverts on the G4S website for other positions at Park Royal including “Precious Metals Shift Manager” (Positions: 4, closing date 31 October 2013), and “Secure Driver” (Positions:15, closing date 23 June 2014, “Deliver cash and valuables to various customers in a physically active role“).
Note that the closing date for the Secure Driver applicants was a few weeks after Deutsche Bank had announced on 6 June 2014 that it had opened the gold vault. So if the drivers hadn’t even been hired in June 2014 and probably not in July 2014 either, then there was nothing being moved in or out of the vault at that time, and there was most likely never any Deutsche Bank precious metals moved in or out of the G4S vault, which would also explain why, in December 2014, “Deutsche declined to comment on the status of its vaulting operation”, and would therefore make the vault an extremely bad and money losing investment decision for Deutsche Bank, as well as a bizarre business decision to commit substantially investment to the vault and then walk away from it 2 years later.
From July to August 2013, G4S even tweeted about these Park Royal roles on its Twitter account and stated the locations of the jobs roles and locations, for example, for “Vault Manager – Precious Metals in Park Royal“.
Not only that, but G4S even advertised these precious metals vault positions to the world on Facebook, complete with the specification of the Park Royal location.
Where is Park Royal? Most people in London, if they know Park Royal at all, would recognise the name as a tube station (train station) and as an area of North West London. Park Royal is just off the North Circular Road, in an industrial area, frequently congested with traffic, just down the road from Hanger Lane roundabout, another often traffic gridlocked area. But as the crow flies, Park Royal is not too far from Heathrow Airport, or the M25 ring-road, or Central London.
As well as telegraphing the general Park Royal area where the new vault was to be built, G4S also went further and specified the exact address of the new operating centre in a planning application document available on the web, conveniently pinpointing the vault building location in this large industrial sprawl, chock full of industrial parks and warehouses:
OFFICE OF THE TRAFFIC COMMISSIONER (LONDON AND THE SOUTH EAST OF ENGLAND) APPLICATIONS AND DECISIONS PUBLICATION DATE: 06 March 2014
Page 13 of document: Reference Number OK0229598 SI
G4S CASH SOLUTIONS (UK) LIMITED
Director(s): KEVIN O’CONNOR, Margaret Ann Ryan, Declan Hunt.
SUTTON PARK HOUSE, 15 CARSHALTON ROAD , SUTTON SM1 4LD
New operating centre: PARK ROYAL, 291 ABBEY ROAD LONDON NW10 7SA
New authorisation at this operating centre will be: 45 vehicle(s), 0 trailer(s)
In this case, the planning reference was referencing an increase in the number of vehicles allowed on the site. However, the more interesting planning applications are to be found not in the Office of the Traffic Commissioner, but in the website of Brent Council. These plans give a good overview of some of the details of the basement and vault that ICBC Standard Bank has just taken on the long-term lease for.
Planning applications for 291 Abbey Road NW10 7SA
The Park Royal area, including 291 Abbey RoadNW10 7SA, is under the remit of Brent Council Borough of London. Brent Council planning applications are available on the Brent Council Planning web site. On the Brent Council web site, there are 5 planning application ‘Case Numbers’ for 219 Abbey Road NW10 7SA submitted since 2012. The sequential nature of there being 5 case numbers just means that after the initial application was made, various details of the application were amended, which necessitated the applicant making subsequent submissions to the Council requesting the changes. This allows the amended plans of the G4S development to be compared to the initial plans. Each of the 5 applications have multiple scanned documents uploaded and attached to the applications.
Case Number 12/2112: This is the original planning application
“Erection of new 2-storey storage facility (Use Class B8)”. Use Class B8 means Distribution or Storage. B8 building use is for storage or as a distribution centre. This application was submitted on 9 August 2012, and the application was granted on 9 November 2012.
Pick Everard architectural practice describes itself on its website as “a leading independent, multi-professional consultancy practice working within the property, infrastructure and construction industry.”
Notice that on the diagram, there is a square-shaped basement specified on the floor plans, listed as ‘Basement Storage’, and this basement is specified as 1178 square metres. This 1178 sq mt space is approximately 34 metres * 34 metres. Furthermore, the ground floor level is listed as “Industrial Warehouse”, 1132 sq metres, with “Vehicle Loading Bays” at the rear, and the 2nd Floor level is listed as “Offices”.
“If you wish to store the higher value precious metals then you may find that insurers insist that your vaults are subterranean.”
It appears that these guidelines were specifically written for Deutsche Bank and G4S to follow since they were the only parties submitting a planning application for a new precious metals vault in London at that time, and the dates fit exactly. Case Number 12/2112 also includes an initial site location plan Project Park Royal – Document 120437 A 001 J Site Location Plan showing an overview of the site, with car park at front, building in the middle with truck loading bays at the back of the buildings, and truck parking at the rear of the site.
Case number 12/3371: Some small extra details
Case 12/3371 is just an application containing extra details about construction materials etc and security gates, barriers etc. This application was submitted on 18 December 2012, and granted on 12 February 2013.
Case Number 12/3344: Some small extra details
Case 12/3344 just covers some extra details such as car park spaces at the front of the site, for 32 cars, 30 staff/visitor spaces, and 2 disabled spaces. That application was submitted on December 2012, and granted on 13 February 2013.
Case Number 13/0722: Some important revisions to the Project, including a reduction in the size of the Basement
Case Number 13/0722 is interesting in that it included a reduction in the size of the basement from 1178 sq metres in the original application, to 750 sq metres. This application was submitted on 25 March 2013, and granted on 22 April 2013.
The accompanying Delegated Report specified a “Non-material amendment application to: (a) reduce basement area, and other changes such as (e) alterations to fencing, (f) reduction in number of vehicle loading bay shutters from 6 to 5.
“It is proposed to reduce the size of the basement from 1178sqm (as approved) to 750sqm. This is below ground level and will not have a material impact.”
In the revised floor plan Project Park Royal – Document 120437 A 105 C Typical floor plans and sections, the basement, still listed as ‘Basement Storage’, has been remodelled as a rectangular space and reduced in size to 750 square metres from 1178 sq metres, i.e. a reduction of 428 square metres compared to the original submission. This new 750 sq metre size, as a rectangular area, is roughly 19 metres * 38 metres. See revised floor plans. While a smaller basement does not necessarily mean a smaller vault, the basement size was more than likely reduced specifically because the vault size had been reduced.
If this was the case, then its possible that Deutsche Bank communicated to G4S that the vault size was to be reduced due to gold bullion exiting London for Asia (via Switzerland) in 2012 and especially during early 2013, and a fear that the previous planned size for the vault would be too big for the intended London bullion activity requirements.
The floor plan diagram specifying the reduced basement was actually created on 26 April 2013, which is coincidentally the week following the historic two-day gold price smash that occurred over Friday 13th and Monday 16th April 2013. Said another way, the amended planning application which specified the basement size reduction was submitted 2 weeks before the historic gold price smash of 13-16 April 2013, and the application amendment to the floor plans was granted the week after the historic gold price smash of 13-16 April 2013.
When the Deutsche/G4S vault opened in June 2014, Reuters reported that the vault’s capacity was 1,500 tonnes of gold. It’s not clear if this capacity statistic was the capacity from a larger vault that would have been in the larger basement area, i.e. 1178 sq mtrs, which a source may have supplied to Reuters at an earlier time, or whether it referred to a smaller vault within the smaller and revised 750 sq mtr basement area. For if the vault can now hold 1,500 tonnes of gold within a smaller basement, the original basement, being 57% larger, may have been designed to hold in excess of 2,300 tonnes of gold.
It’s either a fortunate or unfortunate set of timings that Deutsche/G4S applied to reduce the size of one of the largest ever precious metals vaults in London within a few weeks of the gold price being critically injured by huge gold futures contract short trading over the 13-16 April 2013 period. It would be interesting to know who made the decision to reduce the area of the basement, and on what rationale this decision was based.
Again, as to how much precious metal, if any, Deutsche Bank ever processed or held in the Park Royal vault is debatable, since a) the vault was not operational until June 2014 and b) Deutsche Bank was rapidly exiting the London Gold Market at that time. It therefore makes this LinkedIn profile of the person who actually performed the job of Precious Metals Manager at the vault all the more interesting, a role which is stated to have lasted from December 2013 to May 2015, but a profile in which the references to physically related precious metal activities just refer to the job spec bullet points, and the achievements listed predominantly concern the vault and not the contents of the vault.
Likewise, the ‘Bullion Operations Manager‘ at the G4S vault, a vault which was exclusively for Deutsche’s clients, must have seen fallow periods in which no metal passed over the vault’s threshold with the LinkedIn profile predominantly listing job spec bullet points. However, interestingly, the profile refers to ‘Leasing with [a] major financial corporation to ensure compliance to contractual agreements‘, so there were, as would be the case, contractual agreements between Deutsche and G4S. On the Deutsche side, these contractual agreements would raise the question of what penalties, if any, Deutsche Bank incurred in exiting contractual obligations with G4S, and whether Deutsche would have received a get-out exemption by delivering ICBC Standard Bank as the willing recipient of the vault lease.
The planning applications submitted to Brent Council also include a “Method Statement & Logistics Plan” report written by the construction contractor Galliford Try for the project. On its website, Gallilford Try describes its Construction division as “a leading construction company, carrying out building and infrastructure works across the UK.”
Galliford Try’s Method Statement & Logistics Plan report, which is useful as a comparison benchmark to the actual construction that was completed, reckoned that the construction would take 50 weeks to complete, which probably explains why the vault and building was only complete in mid-2014, given that the amended planning application was only granted by Brent Council on 22 April 2013. It still however does not help in explaining why Deutsche Bank initially thought in 2012 that the vault would be ready for its clients to use in 2013.
Crucially, page 4 of the Galliford Try report, in a section titled “Internal Finishes (weeks 27-50)“, sub-section “Basement (weeks 26 -40)“, confirms that “Once the ceiling grid works have been completed the steel / vault doors will be installed“, which proves beyond doubt that the vault is located in the basement of the G4S operating centre. There are also kitchen and toilet areas in the basement as per other London subterranean precious metals vaults.
On page 3, when discussing the basement excavation and basement concrete slab floor, it also states that “Pockets will be formed in the floor for the fitting of the security doors etc“, and that “the lift pits…will be installed.”
From page 2:
From page 3:
From page 4:
The Park Royal site on which G4S built the operating centre and vault was first put on the market in November 2011 by Clay Street Property Consultants. The site occupies 1.89 acres and was sold (presumably to a G4S related company) in April 2012 for £4.5 million:
291 Abbey Road & 2-4 Penny Road, Park Royal , London
Marketed in November 2011 the 1.89 acre site attracted a broad range of interest including institutional investors, property companies, developers and owner occupiers.
Securing 15 bids all at in excess of the asking price the site was sold in April 2012 to an owner occupier for £4,500,000 reflecting a price of £2.38m per acre.
A Google Earth image from July 2013 shows the site with the new development in full flight, and the construction of the basement in progress, and so allows a determination of whether the construction was following the last set of plans approved by Brent Council:
Zooming in on the construction of the basement area from July 2013, the image shows the rectangular darker area where the vault was being positioned, and the lift-pits to the right of the image, one lift shaft at the front, and two towards the rear, which would be adjacent to the truck loading bays. This shape is very much in keeping with the basement size reduction to 750 square metres in the ultimate set of plans approved by Brent Council.
Finally, a Google Earth image from June 2015 shows an aerial view of the completed G4S development.
The hasty exit of Deutsche Bank from the London Gold Market has never been adequately explained by the media. It remains an elephant in the room that the mainstream media does not seem to want to touch. The composition and operating mechanisms of the private LPMCL club is also another elephant in the room that mainstream media journalists have never adequately analysed and are unlikely to do so.
Now that ICBC Standard Bank has taken on the remaining term of the 10 year G4S lease that was vacated by Deutsche Bank, the key questions for ICBC are to what use will the state-controlled Chinese bank put this precious metals vault to, and whether the 5 incumbent LPMCL members will formally (along with the Bank of England informally) give the go-ahead to allow ICBC become a member of the private syndicate that is London Precious Metals Clearing Limited. The other outstanding question is whether Standard Chartered will also be involved in any extension of membership of LPMCL.
Another little appreciated fact is that during the pitches for the replacements to the Gold Fixing and Silver Fixing auctions, most of the exchanges and companies making the pitches, such as, CME, LME, ICE, all offered working solutions that included centralised on-exchange clearing of precious metals for the London Gold and Silver Markets. These solutions were even included in the various presentation materials of CME, ICE and LME, and made it into market presentations and press releases etc, however, the LBMA and its various associated accomplishes such as the LPMCL, pushed back completely on any part of solution that would have encroached on the existing LMPCL clearing mechanism.
The question of why LMPCL was so ‘precious’ that it needed protection from a transparent on-exchange clearing platform is also a question that mainstream financial journalists seem to have entirely missed. I will write a future blog post on LPMCL so as to shed some light on this thoroughly protected private syndicate of bullion bank clearers.
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