THE PRECIOUS METALS MARKET IS GETTING MORE REGULATED FOR THE BETTER OR WORSE? FOR THE BETTER OR WORSE? Sakhila Mirza Sakhila Mirza Sakhila Mirza Sakhila Mirza LBMA General Counsel & Executive Board Director LBMA General Counsel & Executive Board Director LBMA General Counsel & Executive Board Director LBMA General Counsel & Executive Board Director 10 June 2019 10 June 2019 10 June 2019 10 June 2019
LONDON BULLION MARKET Our mission is to ensure the highest levels of Our mission is to ensure the highest levels of Our mission is to ensure the highest levels of leadership, integrity and transparency Our mission is to ensure the highest levels of leadership, integrity and transparency leadership, integrity and transparency leadership, integrity and transparency for for for for the global the global precious metals industry by setting standards and developing market precious metals industry by setting standards and developing market the the global global precious metals industry by setting standards and developing market precious metals industry by setting standards and developing market services. services services services Vaulting Services Metal Accounts Good Delivery Benchmarks Clearing System Vaulting LPMCL LBMA Good Delivery Benchmarks Market Infrastructure LBMA LBMA & 3rd Party provided by Metal Accounts, & LPMCL Administrators LBMA, LPMCL & Clearing System Benchmark administrators
LEGISLATION – REGULATION – SELF-REGULATION Integrity, Transparency, Leadership Integrity, Transparency, Leadership Integrity, Transparency, Leadership Integrity, Transparency, Leadership Legislation Legislation Legislation Legislation Regulation Regulation Regulation Regulation Self Regulation Self Regulation Self Regulation Self Regulation Sanctions lists Dodd Frank Regulation Good Delivery Rules Terminal Markets Order Benchmark Regulations Responsible Sourcing (UK) Guidance MiFID I / II Proceeds of Crime / Global Precious Metals equivalent Code Market Abuse Regulations / equivalent Commodity Exchange Act Trade Reporting (US)
GLOBAL PRECIOUS METALS CODE: INTEGRITY Mandatory for LBMA Members Mandatory for LBMA Members Mandatory for LBMA Members Mandatory for LBMA Members Chapter Principles 1 Ethics High ethical and professional Public Public Public Public r r register r egister egister egister on the LBMA Website on the LBMA Website on the LBMA Website on the LBMA Website standards; manage conflicts of interest 2 Governance, Appropriate oversight; compliance Compliance, and risk management frameworks; The Bank of England attested their The Bank of England attested their The Bank of England attested their The Bank of England attested their Risk escalation’ independent adherence to the Code adherence to the Code Management: reviews/assessments adherence to the Code adherence to the Code 3 Information Handling confidential information; sharing provide for clear, accurate Global application Global application Global application Global application communication 4 Business Pre-trade and execution; due conduct diligence; handling orders fairly; Proportionality is key Proportionality is key Proportionality is key Proportionality is key guidance on Mark-ups; benchmark auctions 5 Business Post-trade (confirmation process, conduct netting, settlement, shipping) Annex Illustrative examples: definitions, conventions
BENCHMARKS TODAY: TRANSPARENCY LBMA Precious Metals Prices LBMA Precious Metals Prices LBMA Precious Metals Prices LBMA Precious Metals Prices 01 01 01 01 01 01 01 01 02 02 02 02 02 02 02 02 03 03 03 03 03 03 03 03 04 04 04 04 04 04 04 04 05 05 05 05 05 05 05 05 06 06 06 06 06 06 06 06 07 07 07 07 07 07 07 07 08 08 08 08 08 08 08 08 Gold, Open to Independent Global Industry Silver, expanded direct Oversight Representatives Platinum participation Committee and Palladium Spot prices Tradable Independent Non-Executive Participant Live Auction Administrators Directors Representatives
GLOBAL GOLD MARKET: TRANSPARENCY Global Gold Market Asset Comparison Average Daily Volume Average Daily Volume 70 Million toz LBMA-i Gold Comex SHFE ETFs Tocom SGE US Treasury Bills Global Gold Market EU Sovereign Bonds Source: LBMA-I and Metals Focus Sources: SIFMA, LBMA, AFME
RESPONSIBLE SOURCING: LEADERSHIP Implementing Legislative /Regulatory requirements, but also future proofing Implementing Legislative /Regulatory requirements, but also future proofing Implementing Legislative /Regulatory requirements, but also future proofing Implementing Legislative /Regulatory requirements, but also future proofing LEGAL ISSUES LEGAL ISSUES RESPONSIBLE RESPONSIBLE ALL COMPANIES ALL COMPANIES SOURCING SHOULD • Global Sanctions List • Conflicts Minerals • Have policies and procedures to address the risks • Anti-Bribery and Corruption • Anti-Money Laundering • Monitoring and Surveillance to • Human Slavery Act • Terrorist Financing identify suspicions • OECD Annex II risks • Report on suspicions
EU CONFLICT MINERALS: LEADERSHIP Enforced from 2021 Enforced from Enforced from Enforced from 2021 2021 2021 LBMA’s Responsible Sourcing Programme to apply for recognition LBMA’s Responsible Sourcing Programme to apply for recognition LBMA’s Responsible Sourcing Programme to apply for recognition LBMA’s Responsible Sourcing Programme to apply for recognition EC will produce a OECD Alignment The Regulation list of recognised Assessment to introduces refiners and support the process mandatory assessing industry assessing industry for recognition under for recognition under reporting for reporting for schemes the Regulation bullion banks Alignment Assessment Closely follow the structure and content of the OECD Guidance. Guidance. Guidance. Guidance. Responsibility and accountability clearly understoodby refiners. refiners. refiners. refiners. Strong internal governance and structured management processes. processes. processes. processes.
TECHNOLOGY DEVELOPMENTS: LEADERSHIP This initiative builds on the LBMA’s Responsible This initiative builds on the LBMA’s This initiative builds on the LBMA’s This initiative builds on the LBMA’s Responsible Responsible Responsible Sourcing Programme Sourcing Programme Sourcing Programme and Sourcing Programme and and focuses on how and focuses on how focuses on how focuses on how blockchain can ensure supply chain blockchain can ensure supply chain provenance. blockchain can ensure supply chain blockchain can ensure supply chain provenance. provenance. provenance. In addition, it will also look at minimising the risks In addition, it will also look at minimising the risks In addition, it will also look at In addition, it will also look at minimising the risks minimising the risks associated with fraud and breaches of security. associated with fraud and breaches of security. associated with fraud and breaches of security. associated with fraud and breaches of security. Phase One will focus on Phase One will focus on kilobars & large kilobars & large bars. bars. Phase One will focus on Phase One will focus on kilobars & large kilobars & large bars. bars. Gold Bar Integrity to Gold Bar Integrity to further strengthen Technology to help mitigate the risk faced throughout Technology to help mitigate the risk faced throughout Technology to help mitigate the risk faced throughout Technology to help mitigate the risk faced throughout the gold supply chain the life cycle of the bar, and help to securely record the life cycle of the bar, and help to securely record the life cycle of the bar, and help to securely record the life cycle of the bar, and help to securely record bar specific data (i.e. brand, origin, custody, location) bar specific data (i.e. brand, origin, custody, location) bar specific data (i.e. brand, origin, custody, location) bar specific data (i.e. brand, origin, custody, location) on a trusted platform. on a trusted on a trusted on a trusted platform. platform. platform. Technology to develop covert and overt security Technology to develop covert and overt security Technology to develop covert and overt security Technology to develop covert and overt security features to provide confidence in the bar being what features to provide confidence in the bar being what features to provide confidence in the bar being what features to provide confidence in the bar being what it purports to be. it purports to be. it purports to be. it purports to be.
SAKHILA.MIRZA@LBMA.ORG.UK SAKHILA.MIRZA@LBMA.ORG.UK WWW lbma.org.uk WWW WWW WWW @lbmaexecutive LBMA LBMA
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