Monday, September 19, 2011

Australian Bullion Exchange

The Australian Bullion Exchange (ABX) is the first gold exchange to be opened in Australia. It will begin trading in just a few short weeks on Oct the 4th and will be an additional way to buy gold not just in Australia but internationally as well.

The Board of Directors currently consist of Thomas Coughlin, Michael Coughlin and David Charles.

Thomas Coughlin, the Chief Executive recently stated, "the ABX would connect bullion traders from around the world including Perth Mint, with the financial sector such as fund managers and stock brokers."

All gold silver and platinum bullion trading will be done through listed brokers or "members".

As to why a bullion exchange in Australia, "Previously in Australia, there wasn't enough physical bullion trading to warrant a market," he said."But now that there is, it is certainly feasible and also required because at the moment the costs associated in the physical bullion industry can be brought down by offering a centralised marketplace where we can foster competitiveness."

The ABX will also offer storage in its Brisbane facility, rated by Lloyds of London as the most secure in Australia. "Should the financial world implode, then there's bullion sitting in the vault here in Brisbane," Mr Coughlin said. "Instead of transporting the bullion over the world ... it is simply a title change in the vault."

The minimum amount of precious metals that can be traded will be one gram of gold. There is no maximum.

Mr Coughlin Indicated the ABX would be an attractive alternative to the exchange traded markets as prices would be based on real time international inter-bank spot bullion markets on the basis it would eliminated pricing risk and provided transparency. "During volatile times ... ETFs can actually dislocate from the spot price of bullion because they are effectively a shadow market that rely upon market-makers to retain the integrity of that price," he said. "On the silver ETF, it has dislocated up to 12 per cent each way and on the gold market, it has dislocated up to 5.5 per cent either way. That can really hurt an investor."

He added, "Given the strength of the physical bullion investment market, a central exchange is critical to provide a fair and efficient marketplace for all participants. Australia is the second largest gold producer in the world; we should have a globally recognised exchange to accompany this position. "

"Precious metals hold significant value as an investment asset class, but at the moment the holistic options for direct ownership of bullion are limited in Australia. The ABX strips away all financial engineering to provide a marketplace that is simple, secure and highly accessible and, at the same time, improves competition and market efficiency. "

The ABX office is in Market Street Brisbane, Australia.

How it works
The ABX is an Australian domiciled over-the-counter (OTC) spot market for investment-grade gold, silver and platinum bullion. The exchange is a principal-to-principal investment market formed through a member structure of finance and bullion industry participants.

Unlike bullion Exchange Traded Funds (ETFs), ABX is not priced on a shadow market with price dislocation risk, instead The ABX has adopted the London Bullion Market Association (LBMA) principles for assessing bullion, widely recognised as world best practice and is priced upon real-time international inter-bank spot bullion markets in nine different currencies.

No financial products are traded on the ABX, but instead, physical bullion ready for immediate-delivery and appropriate for short, medium and long-term investment. One can, of ocurse, simply buy gold this way through a broker and park it there in storage.

Listed Brokers
ABX is a principal-to-principal exchange, meaning only ABX members can directly trade on the exchange.

Retail investors access the exchange through an ABX Broker Member. An ABX Broker can easily be selected from our official Member List on their website
A list of brokers will be provided on "open day" on the ABX website, Investors will be required simply to browse the ABX broker listing for their most suitable service provider.

ABX listed Brokers will offer investors precious metal bullion exposure, appropriate for short, medium and long-term investment.

The ABX provides guidance and support for all Members and employees of the Exchange through the following compliance support services:

Provision of Rulebook
Provision of Guides and Procedures for operation on the Exchange
Notification of bullion industry specific legislative requirements
Provision of legislative procedures
Provision of template contractual forms
Holding annual Member professional development seminars and training.

The ABX Rulebook details the rules of the Exchange, and builds the Quality Assurance Framework - for which all Members and ABX employees will be expected to comply with.

Disciplinary action for non-compliance with the ABX Rulebook will be determined by the Corporate Governance, Compliance & Enforcement Committee. Recommendations will be passed to the Board of Directors.

Disciplinary action for non-compliance with bullion industry specific legislative requirements will be contemplated by the Corporate Governance, Compliance & Enforcement Committee. If deemed necessary, certain conduct may be reported to relevant authorities. The Corporate Governance, Compliance & Enforcement Committee will also make disciplinary recommendations to the Board of Directors.

Precious Metals
The ABX will provide a centralised market place for trade in the following investment grade precious metals:


Retail investors will be provided access to trading on the ABX through listed brokers.

Trading is 100% transparent and subject to standardised terms of trade. Pricing is set by the real-time international spot bullion market.

All market pricing is set by the real-time international inter-bank spot bullion market price or the London Fix prices.

The London AM Fix Gold Price is set each day at 10:30am and 3pm London time (7:30pm and 12am AEST consecutively).

Due to higher fabrication costs and sometimes rarity, coins typically carry a premium over the international bullion spot price.

ABX will set a premium on different coins in accordance with the most cost-effective provider on the Exchange at any one point in time and this premium will always be clearly displayed on the ABX website.

The Australian Bullion Exchange with provide trading across nine currencies as follows:

Australian Dollar (AUD)
United States Dollar (USD)
Euro (EUR)
Great British Pound (GBP)
Canadian Dollar (CAD)
Japanese Yen (JPY)
Hong Kong Dollar (HKD)
Singapore Dollar (SGD)
New Zealand Dollar (NZD

The market will be priced based on the real-time international inter-bank spot bullion markets in nine different currencies, eliminating pricing risk and providing transparency.

“We offer a holistic end-to-end facility for investors wanting exposure to precious metals based on world best practice quality assurance frameworks, security arrangements, technology systems and governance structures,” said Mr Coughlin.

The ABX will also offer custodial services for investors who do not want to store the bullion themselves. no mention of the storage costs as yet so if you want to buy gold and store it there you would need to establish that first.

Brady plc, a leading global supplier of trading, risk management and settlement solutions to the metals, energy and soft commodity sectors, was recently selected to supply to ABX’s core

ABX minimum bar order size
The minimum bar order size is, for internally sourced bullion, gold is one gram, silver one ounce and platinum half an ounce. For externally source bullion, gold is 10 ounces, silver 15 kilograms and platinum half a kilo.

Storage Security
ABX’s bullion custodial storage operates 100% independent of the banking system, so a financial crisis or bank insolvency would never compromise the security of ABX’s stored bullion.

The Exchange’s stored bullion is located in the ABX Secure Vault Area (ASVA) in a vault in Brisbane, Australia, rated by insurance syndicate, Lloyds of London as the most secure in Australia. ASVA segregated within the vault facility accompanied by additional high security monitoring systems and protocols.

ASVA is essentially a vault within a vault and virtually impenetrable.

Entrance into ASVA requires simultaneous, triple biometric and key authentication, from the following parties:

The Vault Operator; and
Inspectorate (audit and inspection firm)

These are the only three parties authorised to access ASVA and they can only access simultaneously.

The separation of access power away from any one party and across these entities virtually eliminates storage risk, providing arguably the safest bullion custodial service in the world.

All bullion entering into ASVA passes through the inspection, testing and verification process. Verification Certificates are issued for each bar in respect of all allocated bullion holdings.

All bars are photographed, weighed by LBMA approved scales and non-invasively tested for purity.

Bullion holdings are dual audited by Inspectorate and a registered Australian auditor.

All bullion is insured on a replacement basis and underwritten by Lloyd’s of London syndicate members.

Bullion is held in an allocated and segregated account for each investor, meaning absolute title is always held on specific bullion bars/coins that are additionally segregated from all other investor bullion holdings within the vault. Allocated and segregated storage is unquestionably the safest form of bullion storage.

Final word on the Australian Bullion Exchange
The new Australian Bullion Exchange exchange is a testament to the increasing perception that precious metals are more reliable in terms of accumulating secure wealth and in these times of economic uncertainty.

We will be watching the progress of the Australian Bullion Exchange with great interest.

One final note. When the brokers list is displayed on site, it is a good idea to ensure you select a licensed broker through the Australian Bullion Exchange and also ensure you take their fees into account when it comes to the gold price you pay when you buy gold.

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