Bank of China becomes first Asian bank to directly participate in gold auction

June 16, 2015

Beijing-China (Jun 16)  Intercontinental Exchange (ICE) Tuesday announced that the Bank of China has been approved by the ICE benchmark administration to participate in the gold auction which is used to determine the London Bullion Market Association (LBMA) gold price, a benchmark physical gold price in the world.On the same day, the bank stated it was the first Chinese and Asian bank to directly participate at the gold price auction.

Direct participation

The London gold market has long been accepted as the global spot gold pricing centre. The LBMA gold price, which replaced the London gold fix established in 1919, is widely used in settlements between producers, consumers and financial institutions, and has been an important pricing benchmark for gold derivative contracts.

Since assuming administration of the gold auction, IBA has grown the number of direct participants and significantly increased auction volumes.

Finbarr Hutcheson, president of the ICE benchmark administration, said in a statement: "We are delighted to welcome Bank of China to the gold auction. The growth in daily volumes coupled with the increase in participation from around the globe, demonstrates strong market support for the independent governance and oversight we have implemented to bring transparency and trust to the gold price auction."

Average daily volumes for the morning and afternoon gold auctions have more than doubled, compared with the five months prior to the agency's administration, data showed.

Ruth Crowell, chief executive at LBMA, said: "I am delighted to see the growth in the number of direct participants to the LBMA gold price. In particular, I welcome the addition of Bank of China. As one of the LBMA's founding members, it is appropriate that they should be the first Chinese participant."

First Asian bank

Sun Yu, general manager at Bank of China London Branch and CEO at Bank of China (UK) Limited, said the bank was proud to become the first Chinese and Asian bank to directly participate in the gold auction.

He said: "Despite being the world's largest gold producer and consumer, China has never played a major role in the global gold fixing."

The bank will reinforce the connection between the Chinese domestic market and overseas markets, making the international gold price better reflect the supply and demand in China, as well as promoting the internationalization of the Chinese gold market, he added.

The Bank of China has been actively participating in the gold trading business in London for over 40 years. Its London branch was the first overseas branch and joined the LBMA as an initial member in 1987. It became the only Chinese bank with membership for the subsequent 20 years.

Products based on the LBMA gold price will now be developed and delivered, reducing clients' cost and providing more transparency to the transactional process, analysts said.

Source: GlobalTimes

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