FMSB Publishes Final LBMA Auction Standard

The FICC Markets Standards Board (FMSB) has published the final Standard for the Conduct of Participants in LBMA Precious Metal Auctions, a transparency draft was released in October 2021 requesting feedback, the result of which, FMSB says, were minor wording changes and additions to the Explanation section of the paper.

The publication has been welcomed by David Mears, vice president, market structure at LME, who says, “The LBMA platinum and palladium price 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.”

LBMA auctions establish prices in certain precious metals that are used as benchmark reference prices. Participants in auctions submit bids and offers on behalf of clients wishing to buy or sell the relevant metal and are also able to submit bids and offers for themselves. FMSB says that it understands that certain participants in an auction may not be submitting proprietary orders due to concerns around the management of regulatory and conduct risks associated with the sourcing of liquidity through an auction process which sets the LBMA precious metal price; or the need to manage both Client and house orders in the auctions.

The latest Standard, the ninth published by FMSB, through its five Core Principles, clarifies the way in which those risks can be managed, it says. The Standards will also help 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 says.

“This Standard should help to increase the liquidity available in LBMA Auctions, thereby enhancing the effectiveness of the market,” says Myles McGuinness, CEO of FMSB. “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.”