REGULATION UPDATE. Overview and Update. Sakhila Mirza General Counsel, LBMA

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1 REGULATION UPDATE Overview and Update Sakhila Mirza General Counsel, LBMA

2 REGULATION A WORLD OF ACRONYMS Where to begin EMIR MIFIR/MIFID NSFR/Basel III AML Directive FCA ESMA FEMR ISCO EP MAD/MAR Regulations DFA OECD EC TMO CFTC REACH Conflict Minerals Benchmark 2 IOSCO Principles

3 EU CONFLICT MINERALS UPDATE Draft Regulation final expected 2016 Regulation on Responsible Sourcing of minerals from conflict-affected and high-risk areas (global focus) Requirement for all importers of gold into the EU (including bullion & coins). All banks and other downstream participants to arrange an independent third party audit under the draft regulation EU plans to publish an EU Audit standard for all downstream audits in member states 3

4 NET STABLE FUNDING RATIO Basel III New Liquidity Standards Purpose To ensure that banks hold a minimum amount of stable funding based on the liquidity characteristics of their assets and activities over a one year horizon Required Stable Funding factor of 85% of their gold holdings with term funding over 1 year Impact Fall in liquidity banks departure from business Increase in costs transferred potentially to end user 4

5 MiFID / MiFIR Europe: Commodity Derivatives Fairer, safer and more efficient markets Tests to determine whether a non-financial firms speculative investment activities are significant enough to be subject to MiFID II Ranges for the new EU-wide commodity derivatives positions limits regime Provisions regulating non-discriminatory access to central counterparties, trading venues and benchmarks Greater Transparency Newly introduced reporting requirements for commodity derivatives Stronger investor protection Improved disclosure 5

6 FAIR & EFFECTIVE MARKETS REVIEW UK Bank of England, FCA, HMT Purpose of Review: To review the fairness and effectiveness of the Fixed Income, Currency and Commodities (FICC) markets and provide recommendations on ways in which, where necessary fairness and effectiveness might be improved What matters to the LBMA Fair & Effective Market for all members of the value-chain Continued Collaboration with Regulators Fit for Purpose Market Development - For the Market, by the Market Safeguarding the integrity of the Market Increased global liquidity & wealth creation for UK plc Leveraging London-centric expertise 6

7 MARKET IN TRANSITION Responding to the Changing Landscape FEMR Objectives: Transparency Openness Equality of opportunity Safeguards Effectiveness FEMR Outcomes: Reporting NIPS code revision Competition Global Centres (China, India, Singapore) Potential Services for Market Enhancement Information Services Clearing Services Platforms Transactions reporting and matching Pricing and benchmarking Authorisation services (GDL, Membership, Vaulting) Spot clearing or unallocated settlement Derivatives clearing OTC trading platform Exchange services 7

8 LONDON BULLION MARKET Market dynamics are driving change Drivers of change Market fragmentation in industry bodies serving the market Capital and liquidity regulations Anticipated regulatory requirements (FEMR) Risk of reduced liquidity Desire for greater transparency Shift in the market growth in Asia Develop the precious metals market landscape to meet by implementing new services new corporate structure: and new governance Offering new services for members across the value chain 8

9 BENCHMARK REGULATION Subset of FEMR UK regulation on Benchmark 7 new benchmarks from 01 April 2015 Participants to the LBMA Silver and LBMA Gold Price would not be considered submitters and therefore do not need to be regulated The Administrators need to be regulated EU regulation on Benchmark Likely to include all critical benchmarks Speak to local regulators to influence a tailored approach 9

10 LBMA PRECIOUS METAL PRICES Overview Silver launched 15 August 2014 Platinum and Palladium launched 1 December 2014 Gold Launched 20 March 2015 All electronic auction based, different administrators New LBMA subsidiary company Precious Metals Prices Ltd. Metal Platform Compliance Participants Gold ICE Benchmark Administration 11 Silver CME Thomson Reuters Pt & PD LME

11 Contacts