The over-the-counter (OTC) market for gold and silver forwards, based on Loco London delivery, is a vital part of the global bullion market.
CME Group supports this market through our offering of a central counterparty (CCP) clearing service. A clearinghouse, like CME Clearing, is a counterparty for every trade – acting as the buyer for every seller and the seller for every buyer.
Additionally, CME Clearing oversees all aspects of the physical delivery process of unallocated gold and silver.
First, let’s look at how CME Clearing works for gold and silver forwards. Upon completion of the OTC transaction, the trade is submitted to CME Clearing through CME ClearPort.
Since these positions are cleared as OTC forwards and not futures, they are held in a cleared OTC account until expiry. Delivery of bullion occurs through Loco London unallocated accounts operated by LPMCL member banks.
As forwards contracts, the clearing process has some features that differ from futures:
Here are some additional benefits through CME Clearing:
As part of the gold bullion market, CME Group provides solutions and services to its participants interested in clearing their OTC gold and silver forwards.