London 26/05/2016 - Frustration is growing among bullion market participants over the London Bullion Market Association's (LBMA) continuing request for proposal (RfP) aimed at reforming London's gold market.
The LBMA - the international trade association that represents the wholesale over-the-counter market for gold and silver - late last year issued an RfP seeking ideas for the improvement of the London market.
It had submitted a request for information (RfI) in November seeking ideas for how the trade group can deliver an appropriate degree of transparency, attract greater liquidity through technology and increase efficiency and lower costs for institutions doing business.
From the 20 parties that responded to the RfI, the LMBA is believed to have whittled the list down to five parties - the LME, CME Group, the Intercontinental Exchange (ICE), Autilla/Cinnobar and Markit/ABS - to submit their suggested reforms.
A clearing platform or an exchange are among the routes it could take to increase liquidity in the London gold market, which is primarily over-the-counter (OTC), with trades taking place privately between counterparties rather than on an exchange.
But market liquidity has dropped over the past year - many banks have pulled out of commodities and exited precious metals due to tighter regulation following the 2008 financial and banking crisis.
This, the lack of initiatives to staunch the bleeding the flow and the pace at which the LMBA is moving forward are causes for consternation in some quarters of the sector.
"Cautious" and "sceptical whether the reform will be successful" are two comments - among many similar ones - heard from bullion market participants.
"They [the LBMA] want to stay ahead of the curve but they seem to be confused about which direction to take next and that's not a good signal to send to the market," one market participant noted.
Responses to the RfP were requested by mid-March while a decision on the chosen provider was expected in the second quarter. While a target delivery date of the new services is expected in the second half of 2016, according to the LBMA, many believe the whole process will take much longer than originally expected.
"It's not going to happen any time soon. Look at how long it's been going on already," another market participant said. "Don't hold your breath. It seems like we still have a long way to go."
On the other hand, it's an important decision that should not be rushed, another noted.
Some now expect the LBMA to make an announcement at its annual conference in Singapore this October.
(Editing by Mark Shaw)