FMSB Publishes Precious Metals Data Review

The Financial Markets Standards Board (FMSB), a UK body that seeks to establish standards in global financial markets, has published its latest Spotlight Review, looking at data and transparency in precious metals markets.

FMSB says it brought together precious metals trading experts to consider the steps that the gold market needs to take to support the asset’s characterisation as a High-Quality Liquid Asset (HQLA). It is the third in a series of Spotlight Reviews by FMSB members that also cover precious metals market structure and post-trade.

This paper identifies three areas to drive greater trust and confidence in the market: the availability of reference prices; pre-and post- transparency; and robust market surveillance.

The Review suggests the re-introduction of a gold reference rate – which it says could come through a proposed creation of a forward benchmark – could improve transparency in the market and would evidence an “active and sizeable” gold market.

It also calls for an improvement in both point-of-trade transparency through greater adoption of electronic trading, and post-trade price transparency through publicly available historic transaction prices. This should demonstrate the “ease and certainty” of gold’s valuation, the paper argues, as well as the presence of an active, liquid market.

Having sustained price transparency, where price data is published and accessible, could also demonstrate that gold has a low correlation with risky assets, as it has historically been shown to keep its value in times of market stress or crisis, FMSB adds.

The Review also argues that robust market surveillance will support market integrity thereby increasing participant confidence in such markets.

“This publication reveals that we have a great opportunity before us to take action collectively and improve data transparency in the market,” says World Gold Council CEO, David Tait, who led the FMSB Working Group behind the Review. “Harnessing technology to improve trust and confidence will help gold be characterised as a High-Quality Liquid Asset, which will support current and future gold demand. I look forward to continuing work with the entire industry to implement the observations from all three Spotlight Reviews.”

FMSB CEO, Myles McGuinness, adds, “Today’s Spotlight Review identifies key developments that could support more liquid and transparent precious metals markets. We hope that the paper will help inform the broader industry debate around the structure of such markets for the benefit of all participants.”

The paper can be found here.