LBMA plans central hub for London gold market

LONDON, Jan 26 (Reuters) - The London Bullion Market Association is planning a central hub for posting trades in the $5 trillion a year London gold market, LBMA consultant David Gornall said in an editorial in the association's trade magazine the Alchemist (BSE: ALCHEM.BO - news) on Tuesday.

It (Other OTC: ITGL - news) has also agreed on the need for a voluntary reporting system for gold, silver, platinum and palladium spot transactions, as well as non-cash settled forwards, and favours the creation of a data warehouse to gather and store information on transactions, Gornall, a former chairman of the LBMA, said.

However there was no consensus on a key topic: the creation of a proprietary centralised trading platform.

The association completed a request for information (RFI) process late last year to seek views on how to overhaul the gold industry in the face of market fragmentation, rising regulatory pressures, and the threat of shrinking liquidity.

It had earlier commissioned consultancy EY, formerly known as Ernst & Young, to review the London gold market and recommend further developments.

Some 17 exchanges, technology groups and others responded to the RFI. The LBMA is now launching a request for proposals (RFP) from potential data providers in association with EY, the results of which are expected in March.

"It will be important for the appointed service provider to allow open architecture in order to create maximum benefit for the user members," Gornall said in the editorial.

"This would be manifested when members wish to either trade OTC (over the counter) cleared via the platform or convert their OTC trades into a cleared trade, for example, at a later date."

The LBMA will debate ways to fund the interface via the RFP, Gornall said, which could come from sale of data from the data warehouse.

The LBMA said in November that exchanges, brokers and data vendors were interested in providing clearing or reporting services to make the gold market more liquid and transparent.

A clearing platform or an exchange could increase liquidity in the London gold market, and make it cheaper for users, analysts said at the time.

(Reporting by Jan Harvey, editing by David Evans)