Joining the LBMA - Some Frequently Asked Questions

Which types of companies can join the LBMA?

The LBMA's membership stands at over 120 companies in 20 countries which have been admitted as either Members or Associates. All companies within the membership must have activities that are closely related to the London market in gold or silver bullion. These activities include trading, broking, shipping and storage, mining and refining, inspection and assaying and research. Membership on the part of individuals is not permitted.

Who can be a Full Member?

Full members must be companies or organisations which are actively involved in the London bullion market. For entities which trade, this means trading gold or silver bullion or related derivatives such as forwards and options in the loco London market. Full Members also include fabricators, brokers, refiners and shippers. A number of Full Members have been reclassified as Market Makers.

What does being actively involved in the London bullion market entail - must it involve trading?

For companies which trade bullion and derivatives, this means trading in the loco London market with at least three existing members. The volume and frequency of the trading

Who can be an Associate?

The Associate category includes many different types of market participants. For instance Associates may be traders in other markets. If so, they must have bullion based relationships with LBMA Members. Alternatively, Associates may be companies whose activities are judged to be relevant to the London bullion market, such as inspection, assaying and consultancy.

What are the differences in status between a Member and an Associate?

The payment of fees is one difference (see next question). The main difference in terms of status within the LBMA is that Associates do not have voting rights. Associates also have more limited options for sponsoring other applications. See the questions about sponsorship below for more details. In the UK bullion market, Associates are not considered by HM Revenue and Customs as members of the market and hence cannot trade under the terms of the Terminal Markets Order.

What does Membership Cost?

Full Members pay an entry fee of £2,500 payable on admission and an annual subscription of £12,000 (in the case of Market Making Members) and £6,000 in the case of other Full Members. Associates pay an application fee of £500 (which is not refundable if the application is rejected for whatever reason) and an annual levy of £2,500

What does the Associate Review Programme involve?

The status of Associates is reviewed approximately once every three years. As part of this, the Associate is expected to obtain renewed endorsement from its original three sponsors. The review is initiated by the LBMA asking the original sponsors to state if they are willing to continue supporting the Associate. If one or more of the original sponsors is no longer within the LBMA membership, the Associate will be asked to find a new sponsor from from within the membership.

Should a company seeking to join apply as a Member or as an Associate?

There are some general guidelines:

UK trading companies and banks with a branch located in the UK, whether authorised by the FSA or passported in by the FSA (originally authorised elsewhere within the EU or EEA) must apply to become Full Members.
In most cases, banks without a full branch in the UK would apply as Associates though in exceptional circumstances, the LBMA may admit such banks as Full Members.
Dealers, producers and refiners located outside the UK should apply as Associates.
Companies providing services to the market, such as assaying or consultancy, should apply as Associates

Generally speaking, UK-based companies that are directly involved in the market are expected to apply to become Members, though refiners based in the UK may be accepted as Associates at the Management Committee's discretion.

How does sponsorship of applications for Membership work?

Both Member and Associate applicants need to name three companies from amongst the LBMA Membership that are willing to act as sponsors when they submit an application. These should be companies with which the applicant has had a bullion based trading relationship for at least one year. Each sponsor will be asked by the Association to supply a letter of recommendation confirming its belief that the applicant is a suitable candidate for the category of Membership for which it has applied and describing the scope and duration of the bullion-based relationship between the two companies.

Who can act as a sponsor to an application?

In the case of applications for membership, all three sponsors must be full members. If the applicant is a trading company, all sponsors must be on List of Members (List A) which would normally be expected to carry out KYC due diligence with counterparties before trading with them. Other types of company (eg shippers or fabricators) applying for membership may if they choose have a List B Member as one of their three sponsors. In the case of applications for Associateship, one of the sponsors may, if desired, be a List B Member or an Associate. The others must be on List A. The current versions of List A and List B will be provided to companies which apply for membership.

Can a company apply with less than three sponsors?

No. Applicants must be able to name three companies as sponsors. Applications naming less than three sponsors cannot be considered.

Should an applicant contact the three companies it wishes to nominate as sponsors before submitting its application?

Yes. It is essential for an applicant to contact its proposed sponsors prior to submitting an application in order to ensure that these companies are willing to support the application. The LBMA will formally request letters of support from the sponsors after receipt of the completed application.

What information will sponsors be asked to provide about the applicant in their letters of support?

Sponsors will be asked to provide brief details of the scope and extent of their bullion-based business relationship with the applicant. They must confirm that this relationship has existed for a minimum of one year. Where appropriate (where the applicant is a trading company), the sponsor is asked to confirm that the applicant has passed a KYC test.

Under what circumstances might it not be necessary for a sponsor to have carried out a full KYC due diligence assessment on an applicant?

Whether or not a full KYC due diligence assessment needs to have been carried out depends on the nature of the applicant's business. Examples where a KYC test would not normally be required are companies providing e.g. shipping, consulting, information or assaying services to Members.

Must the business relationships between the applicant and its sponsors have been in place for a minimum period of time prior to the submission of a membership application?

Yes - normally they must have been in place for at least one year, though in some cases the LBMA may accept the duration of one of the relationship being less than one year.

What is an "Ordinary" Member?

An Ordinary Member is a Full Member which is not a Market Making Member.

What is the difference between a Market Maker and an Ordinary Member?

Market Makers must quote each other in the chosen product categories (any combination of spot, options and forwards) in both gold and silver throughout the London business day.

Can a company be a Market Maker in only gold or only silver?

No - while it is possible to choose one or more of the three main product categories (spot, options and forwards), a company must do so for both gold and silver.

Can a company not currently within the LBMA membership apply to become a Market Maker?

It is most unlikely that the LBMA would accept an application to become a Market Making Member from a company not within the LBMA membership. The normal procedure is for a company to first become a Full Member and to apply for reclassification subsequently.

What steps should an Ordinary Member take if it wishes to be reclassified as a Market Making Member?

The company should contact the Chief Executive in writing stating in which product category or categories it would like to apply for Market Making status. It will then need to undergo a probationary period of approximately three months, during which time it must quote the current Market Making Members. At the conclusion of this period, a poll is taken of the Market Making Members to determine if they are satisfied with the service provided by the applicant and are willing to recommend its application for Market Making status to the Management Committee. The Management Committee would normally expect all Market Makers (in the appropriate categories) to have agreed on the reclassification before approving it.

What should a company do if it wishes to resign its membership?

It should submit its resignation in writing to the Chief Executive before the end of the subscription year (which ends on 31st December). No part of the subscriptions paid is refundable in the case of resignation.

Where can I get further information?

For more information about joining the LBMA or to receive an application pack, please contact us at the email address below.