Apr 112015
 

To trade efficiently, market participants need to agree on standards for the products they deal in. In addition to agreeing where the product they will trade will be located (eg COMEX gold must be in a warehouse in New York) and in what form (eg COMEX bars must weigh 100oz), market participants need to agree on which manufacturers they will accept product from. This is the purpose of accreditation.

In the precious metals markets it is the refiners that are accredited, as refiners are the first point of supply into the market of purified and standardised gold and silver. Accreditation occurs on a market by market basis as well as by metal. So it is possible that a refiner may be accredited for gold but not silver, or in one market but not another. Most of the major refiners are accredited across markets. For example, the Perth Mint is accredited as a refiner, weight master and assayer with the:

  • London Bullion Market Association (LBMA)
  • New York Commodity Exchange (COMEX/CME)
  • Dubai Multi Commodities Centre (DMCC)
  • Tokyo Commodity Exchange (TOCOM)

The most widely recognised and respected accreditation is that granted by the LBMA, which is also licenced by the CME as part of its own accreditation procedures for COMEX. This status is not just based on the requirements for listing, which include an established track record and minimum annual refining volumes and tangible net worth, but also the rigorous scrutiny of an organisation’s standards and procedures and the successful completion of searching practical testing before being accepted for accreditation.

In addition, LBMA accredited refiners are subject to a Proactive Monitoring regime where they have to demonstrate the are maintaining LBMA refining and assaying standards on an ongoing basis.

Market participants can therefore be assured of the stated weight, purity and integrity of the products produced by accredited refiners. The end result is that traders will accept bars from any accredited refiner without question in settlement of their trades, which simplifies the process for both buyer and seller.

The LBMA’s list of accredited refiners can be found here.

Finally, it is important to distinguish between accreditation of refiners from accreditation of product. Each market has different rules as to what form is acceptable for settlement. For example, while the Perth Mint is accredited with both the London and COMEX markets, only its 400oz Good Delivery Bar is accepted in the London market whereas only three Perth Mint gold kilo bars (or a 100oz bar) would be acceptable in settlement of a COMEX futures contract. Perth Mint coins would not be acceptable in either of those markets as they are professional wholesale markets which do not deal in small sized products.

While small sized bars and coins are not themselves accredited, investors do often take comfort that a manufacturer of bars and coins is accredited because it means that the accreditation weight, purity and integrity standards will apply across the organisation and thus to all of their products.