TECHNICAL REPORT on GOLD MARKET INITIATIVE

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Presentation transcript:

TECHNICAL REPORT on GOLD MARKET INITIATIVE

Task Force Activities Formation of the Task Force on Precious Metals, leaded by Borsa İstanbul in the 9th meeting of OIC Member States’ Stock Exchanges Forum on November 15, 2015 Invited Exchanges: Leading exchanges of the OIC Countries on which gold is traded Task Force Participants: Dubai Gold and Commodities Exchange (DGCX), Bursa Malaysia and Borsa İstanbul. Research process and preparation of the Report Thorough researches on the exchanges in the OIC Countries TECHNICAL REPORT on GOLD MARKET INITIATIVE

Task Force Activities Studied countries: Turkey, UAE, Malaysia, Saudi Arabia, Kuwait, Oman, and Qatar The result: Borsa İstanbul, DGCX and Bursa Malaysia stand out Modest or no physical gold or gold futures trade on other organized exchanges operating in above-mentioned countries Thus, the report’s focus is DGCX, Bursa Malaysia and Borsa İstanbul. TECHNICAL REPORT on GOLD MARKET INITIATIVE

Mine Production of Gold (tons) Countries 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Avg. Indonesia 167 114.1 149.5 95.9 160.5 140.1 121.1 93 110.7 116.4 134.3 127.5 Uzbekistan 75.5 74.1 72.9 72.2 70.5 71 71.4 73.3 77.4 81.4 83.2 74.8 Kazakhstan 19.2 21.8 22.6 22 22.5 29.9 36.7 40 42.6 49.2 49.1 32.3 Mali 46.7 56.9 51.9 47 43.9 43.5 50.3 48.2 48.9 47.5 48.5 Burkina Faso 1.7 2.1 2.9 6.9 13.8 25.3 34.1 31.3 35 38.5 38 20.9 Turkey 5.1 8.1 10.1 11.4 14.5 16.6 24.1 29.6 33.5 27.5 19.3 Suriname 18.2 16.9 16.1 17.9 20.8 22.9 24.6 26.5 27 26.6 25.4 22.1 Guinea 14.3 18 23.9 20.4 19.7 18.4 19 21 20 19.4 Sudan 5.6 3.6 3.1 2.7 4 27.9 20.1 21.5 16.5 12.5 Kyrgyzstan 10.6 10.5 17 18.5 11.3 20.2 17.7 16.3 Ivory Coast 3 5.3 8.6 7.3 13.4 14 13.6 22.2 Guyana 8.4 9.7 11.9 12.8 14.4 15.7 12.4 Egypt 4.7 6.3 8.2 11.1 11.8 13.7 Mauritania 0.5 0.6 1.9 6.8 9.1 8.7 10 9.3 6.7 Total 391.6 344.1 378.9 346.5 434.9 444.3 471.7 460.9 497.1 523.9 534.7 439.0 World Total 2,562 2,496 2,499 2,429 2,612 2,742 2,846 2,875 3,064 3,133 3,178 2,765 Share of the OIC (%) 15.3 15.2 16.7 16.2 16.0 16.8 15.8

Scrap Supply of Gold (tons) Countries 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Avg. Turkey 67.7 82.5 71.5 199.0 217.2 122.0 78.0 72.3 56.3 41.4 72.4 100.8 Indonesia 67.0 71.9 67.9 72.5 79.9 64.9 58.3 49.0 36.2 36.3 46.0 60.4 United Arab Emirates 28.2 34.0 43.8 59.4 70.6 110.0 71.4 73.4 57.0 51.4 43.5 59.9 Saudi Arabia & Yemen 92.5 133.7 56.4 69.4 57.3 44.1 37.1 33.5 23.6 20.8 16.8 56.8 Egypt 72.7 77.5 56.5 35.8 65.0 48.0 47.6 53.6 43.2 39.9 35.0 54.0 Pakistan & Afghanistan 30.9 33.4 31.7 35.5 53.8 50.4 42.7 47.2 37.2 28.8 22.5 39.2 Iran 16.1 21.9 23.0 25.9 32.1 32.7 32.4 32.9 24.3 22.1 17.7 26.3 Iraq & Syria 14.4 23.9 19.0 35.6 36.7 36.0 33.1 25.3 17.0 12.4 Malaysia 11.0 19.1 16.4 18.4 19.2 22.2 16.6 13.2 12.3 10.8 Libya 4.6 9.7 9.4 10.4 13.4 15.7 8.8 8.2 7.7 11.1 Lebanon 6.6 9.9 4.8 6.2 15.1 19.7 14.9 12.6 9.6 Kuwait 21.8 10.2 8.5 5.0 4.5 3.9 Morocco 5.9 6.3 9.3 12.0 11.3 8.9 Jordan 8.7 7.0 5.6 9.2 12.7 7.2 7.4 8.3 Algeria 2.7 2.8 3.3 3.6 5.8 6.1 7.9 7.5 6.8 6.7 5.3 Oman & Qatar 3.1 5.7 6.4 7.3 5.4 4.9 The OIC Countries Total 447 571 441 595 713 620 508 488 375 331 339 509 World Total 903 1,133 1,006 1,352 1,728 1,713 1,675 1,677 1,287 1,157 1,172 1,363 Share of the OIC (%) 49.5 39.4 44.4 33.0 25.8 26.1 26.7 26.6 34.7 38.6 38.1 32.8

Jewelry Fabrication (tons) Countries 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Avg. Turkey 251.1 184.9 219.7 183.2 80 73 77 73.8 87.1 114.8 91.6 130.6 Saudi Arabia & Yemen 124.6 89.6 99.5 85 53.5 46.5 36.8 32.5 41.4 37.3 40.8 62.5 Indonesia 86 64.2 62.7 60.8 45.5 38.4 38.7 43.5 51 51.9 48.2 53.7 Malaysia 74.1 58 60.9 56.2 44.9 43.6 37.1 34.7 44.6 44.7 40.9 49.1 Egypt 70.8 50.3 56.5 62.4 44 42.1 28.7 37.4 40.6 37.8 UAE 53.2 45.4 48.1 34 31 26.3 24.7 34.4 33.1 35.1 Pakistan &Afghanistan 53.9 43.8 29.6 26.1 22.1 20.6 24.6 20.9 22.6 Iran 36.5 32.2 36.2 35.6 30 29.9 27.8 27.7 31.3 28 29 Iraq & Syria 21.2 20 22.4 19.6 15.1 14.7 11.4 8.7 7.3 7 14.2 Uzbekistan 9.1 10 10.6 9.6 7.5 10.2 9.9 8.6 9.5 Kazakhstan 9.3 7.4 Bangladesh & Nepal 13.6 11.8 11.7 10.3 8.1 7.7 7.1 7.2 5.7 4.4 Morocco 13.8 9.4 7.6 6.8 6.5 6.4 6.7 8.4 Kuwait 12.3 9.7 8.9 6.6 6.2 5.6 6.3 7.8 Oman & Qatar 11.3 5.9 5.2 4.8 5.8 5.5 Bahrain 5.1 4.5 Jordan 6.9 4.7 5.4 12.4 The OIC Countries Total 885.6 687.9 747.4 674.2 443 410.7 369.2 363.8 430.6 450.7 421.5 535.0 World Total 2,722 2,302 2,426 2,308 1,819 2,033 2,034 2,008 2,439 2,250 2,178 2,229 Share of the OIC (%) 30.8 29.2 24.4 20.2 18.2 18.1 17.7 20.0 19.4 24.0

Official Gold Reserves (tons) Countries 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Avg. Turkey 116.1 195.3 359.6 519.7 529.1 474.4 252.3 Saudi Arabia 143.0 322.9 273.8 Lebanon 286.8 Kazakhstan 59.7 67.3 69.5 71.9 70.4 82.0 115.3 143.7 191.8 238.2 107.0 Algeria 173.6 Libya 143.8 116.6 131.5 Kuwait 79.0 Indonesia 96.4 73.1 74.0 78.1 76.7 Egypt 75.6 Pakistan 65.3 65.4 64.4 64.5 64.9 Malaysia 36.4 35.8 36.3 Jordan 12.8 12.7 14.3 13.8 15.6 19.3 34.5 15.8 Syria 25.9 25.8 Morocco 22.0 22.1 Afghanistan - 21.9 15.9 Bangladesh 3.5 13.5 9.0 Qatar 0.6 12.4 10.3 The OIC Total 1,341 1,325 1,543 1,542 1,547 1,614 1,814 2,008 2,069 2,077 1,656 World Total 30,833 30,468 29,963 29,981 30,506 30,840 31,206 31,681 31,854 32,029 32,804 31,106 Share of the OIC (%) 4.3 4.5 5.1 5.0 5.2 5.7 6.3 6.5 5.3

Gold Refineries & Exchanges 6 (out of 71) refineries of the OIC countries are in the LBMA GDL. UAE-Dubai and Turkey are the most prominent countries on physical gold In Turkey, gold-backed futures and physical gold dealings take place on Borsa Istanbul. Dubai has been an important center for gold in recent years. Gold futures traded at Jakarta Futures Exchange and Bursa Malaysia.

Bursa Malaysia Established in 1973 Home to more than 900 companies across 60 economic activities Comprehensive range of products: Equities, Derivatives, Futures and Options, Offshore and Islamic assets, and Exchange-related services; listing, trading, clearing, settlement and depository.

Bursa Malaysia Uses GLOBEX of the Chicago Mercantile Exchange Group in Derivatives Markets where gold is traded. GLOBEX, an electronic trading platform, offers global connectivity to the broadest array of futures and options across all asset classes, Only gold futures contracts can be traded. Possibly “Gold i-ETF” could be traded in the future.

Dubai Gold And Commodities Exchange - DGCX A subsidiary of DMCC of the Government of Dubai Started trading in 2005 as the regions first commodity derivatives exchange. Owns Dubai Commodities Clearing Corporation, CCP of the markets. Wide range of products; precious metal, base metals, energy and currency sectors. Exchange traded gold products: Gold Futures Spot Gold (with T+2 delivery) India Gold Quanto Futures

Dubai Gold And Commodities Exchange - DGCX Uses EOS of Cinnober, a leading trading technology provider. EOS provides superior transaction speed, more efficient means to access liquidity, higher reliability, enhanced trading and clearing flexibility and global connectivity. EOS enables the DGCX to offer contracts in multiple currencies.

Borsa İstanbul Dates back to 1985 Financial supermarket of Turkey Four markets: Equity Market, Debt Securities Market, Derivatives Market (VIOP), and Precious Metals and Diamond Markets. Spot gold (with T+0 delivery), Gold futures contracts Gold ETF

Borsa İstanbul Currently also uses in-house developed softwares in its market operations. Will migrate onto Nasdaq’s GENIUM INET, a platform for trading, clearing, market surveillance and risk management In the first quarter of 2017 Derivatives Market, by 2018 Precious Metals and Diamond Markets and Debt Securities Market to move.

Conclusion A state-of-the-art and highly adaptable web-based trading and clearing platform. Related exchanges to connect the platform as a pilot scheme. Only authorized members of those exchanges to connect and trade. Foreign bullion banks, Banks and other international market players should be attracted to the system, Physical delivery should be carried out by clearing subsidiaries of those Exchanges. Money clearing institution(s) should be determined beforehand. Gold standard should be defined beforehand.

Conclusion At the outset 1 kg gold bullions and large bars (350 to 430 oz.) with over 0.995 fineness should be traded Harmonization of regulations across countries A commission of experts specialized on the capital markets and related laws needs be formed Market should be spot and derivative Connection among other institutions and products should be developed Delivery location must be an order matching criteria. Borsa İstanbul with its affiliate Takasbank and DGCX with its affilite DCCC are keen to carry out the Project.

Thanks