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The Gold Game Is About To Change: LPMCL Makes It Easier To Join

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The Gold Game Is About To Change: LPMCL Makes It Easier To Join

(Kitco News) - London’s $6.8 trillion-a-year gold market is ready for change, according to a Reuters report, which states that the city’s clearing house — the London Precious Metals Clearing Limited (LPMCL) — is making it easier for others to join.

The LPMCL operates the London’s electronic clearing system, which is responsible for clearing and settling all bullion transactions in London.

The changes implemented attempt to make the organization more transparent after a number of accusations of price manipulation.

New reforms will also make the process of joining the group easier by clarifying all the requirements.

“One of the benefits of the new structure has been to make the LPMCL more accessible to new members and to clarify the entry requirements,” Ruth Crowell, Chief Executive of London Bullion Market Association (LBMA), which conducts administrative services for LPMCL, told Reuters when asked about the recent restructuring.

LPMCL is managed by five banks: HSBC, ICBC Standard Bank, JPMorgan, Scotiabank and UBS. And all five had to sign off on the changes.

The newest member to the group is ICBC, which joined in 2016 and was the first banking group admitted since 2005.

Several other banks tried to join in the past few years and reportedly have failed. For example, sources at LPMCL’s member banks told Reuters that Goldman Sachs’ application was declined.

Another four sources at the LPMCL's member banks said the company lacked “transparency and adequate governance,” Reuters reported.

According to the U.K.’s Companies House register, new LPMCL company was set up to replace the previous one with the same name in September.

“[LPMCL] has recently restructured to reflect the changing corporate and regulatory climate since the Company was incorporated in 2001,” Crowell said. “[The changes were] designed to improve transparency, access to join and the corporate governance of the LPMCL, as well as to provide additional safeguards to the market in the form of revised rules incorporating the latest anti-bribery and corruption provisions.”

Lack of clear requirements meant that the member banks could just “make up reasons” to veto an application, said sources at LPMCL banks.

The new LPMCL company is guided by a charter and a list of application requirements. “Connection to the LPMCL’s Aurum clearing platform and access to a precious metals vault in London . . . would guarantee entry, the sources said,” Reuters said.

There is also a separate category for non-shareholding members. “Membership can now be categorized into User Members and Equity Members,” said Crowell.

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