• Goldman Sachs, ICBC and Citigroup among banks, people said
  • LME has said previously it wants to expand in precious metals

The London Metal Exchange is in talks with the World Gold Council and five banks about the possibility of introducing futures contracts on gold and standardized central clearing, according to two people familiar with the matter.

The talks are exploratory and there’s no time frame for a decision on the contract, which would be for delivery in London, said the people, who asked not to be identified because the matter has not been made public. The banks are ICBC Standard Bank Plc, Citigroup Inc., Morgan Stanley, Goldman Sachs Group Inc. and Societe Generale SA, they said.

The banks and World Gold Council asked for proposals last year from a group of exchanges, including London Stock Exchange, Intercontinental Exchange Inc. and CME Group Inc., on how to start clearing and listed derivatives on gold, the people said. The LME was chosen from that group for more detailed talks, they said.

The LME, the world’s biggest metals bourse, has said for years that it wants to expand into London’s gold market. A move to exchange clearing would reflect a broader shift across global markets as regulators push for more transparency and tighter controls in over-the-counter markets.

London Gold

In 2015, about 4.3 billion ounces of bullion was cleared in London, where custom deals are made on delivery times and size, according to data from CPM Group, a New York-based research firm. At an average price of $1,160 an ounce, the city’s gold trading is about $5 trillion.

The LME, ICBC Standard Bank, Goldman Sachs, Citigroup, Societe Generale and the World Gold Council declined to comment for this story. Morgan Stanley didn’t respond to requests by e-mail and phone.

The LME accounts for more than 70 percent of the world’s industrial metals futures and runs daily platinum and palladium auctions that replaced benchmark fixings. It had an interest in offering a platform for similar gold and silver actions, but lost to ICE Benchmark Administration, CME Group Inc. and Thomson Reuters.

Separately, the London Bullion Market Association, which oversees trade in the city, has invited proposals on how to improve the market and suggested more detailed trade reporting.

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