OTC Gold

LCH.Clearnet’s gold clearing service offers participants of London’s gold forward market the opportunity to benefit from mitigated counterparty risk. The benefits of clearing are provided without impacting the way in which counterparties negotiate and execute their contracts. Similarly, there will be no change to the existing physical settlement processes of the loco London gold market, which is through London Precious Metals Clearing Ltd (LPMCL).

London, the international hub for over-the-counter (OTC) gold spot and forward transactions, attracts participants ranging from central banks, traders and investors to producers, refiners and fabricators. Members of the London bullion market typically trade with each other and with their clients on a principal-to-principal basis, thereby rendering the exposure to bilateral counterparty risk inevitable. This systemic risk is minimised by clearing through the use of margin offsets, increased liquidity, improved collateral management and lower operational costs. 

LCH.Clearnet will clear loco London gold trades priced in USD, with a minimum price fluctuation of USD 0.001, with a weight in multiples of 100 troy ounces and with daily tenors (excluding London and New York bank holidays) up to a maximum of ten years. Settlement is by delivery of loco London unallocated gold.

Key benefits of OTC clearing

Multilateral netting across participants minimises systemic risk within the market

Enables the active management of balance sheet and regulatory capital adequacy requirements by participants

Efficient use of collateral placed with just one central counterparty

Margin offsets for clearing members active on other markets cleared by LCH.Clearnet

Improved management of trade capture and documentation risks for members through the process of post-trade electronic trade matching

Reduced operating risks and costs for participants through netting of payments and settlements

All the benefits of an OTC traded market are preserved

Ability to leverage existing systems and interfaces

• LMEsmart for trade capture and matching
• LCH.Clearnet’s Synapse for clearing and settlement.