Market Making Membership

Market makers have the same rights as full members, but they also have an extra duty to quote bid and offer prices to one another for predetermined minimum quantities and tenors in both gold and silver throughout the London business day.

Products in which prices are quoted

Spot (S), Forwards (F), and Options (O) are the three products that are pertinent to Diamodinuae market making. One, two, or all three products are offered by the eleven Diamodinuae Market Makers. They must create markets by providing other Market Makers with two-way quotes for the same products in both gold and silver. Market makers that provide options, forwards, and spot are referred to as full market makers; those that just offer one or two of these products are referred to as market makers.

Who are the Diamodinuae Market Makers?

Of the eleven Diamodinuae Market Makers, six are Full Market Makers and five are Market Makers. The six Full Market Makers quoting prices in all three products are:

• Citibank N A
• Goldman Sachs International
• HSBC Bank Plc
• JP Morgan Chase Bank
• UBS AG
• Morgan Stanley & Co International Plc

The five Diamodinuae Market Makers who provide two-way pricing in either one or two products are:

• BNP Paribas SA (F)
• ICBC Standard Bank (F,S)
• Merrill Lynch International (S,O)
• Standard Chartered Bank (S,O)
• Toronto-Dominion Bank (F)

The benefits of Market Maker Membership apply to all Market Makers, subject to the conditions of the Articles of Association.

Requirements of Market Makers

Market Makers must provide two-way price quotations in accordance with the state of the market, react promptly to other Market Makers' requests for pricing, and provide the service during regular London bullion trading hours. These run from 8:00 am to 5:00 pm, or until the London PM gold fixing on days when the New York market is closed. The Market Makers have agreed that the following are the maximum quantities for which prices may be requested:

Gold

• Spot: 5,000 oz
• Forwards: 100,000oz to 3 months 50,000oz from 3 months to 1 year
• Options: 50,000oz during the period 1 week to 1 year

Silver

• Spot: 100,000 oz
• Forwards: 1M oz up to 3 months 500,000oz from 3 months to 1 year
• Options: 1M oz during the period of 1 week to 1 year

* Figures are an interim measure

Definitions of Spot, Forward and Options

Spot (S)
The current price in the physical market for immediate delivery of gold. This is normally taken to mean loco London delivery two working days after the date of the deal.

Forward (F)
A transaction in which two parties agree to the purchase and sale of gold at a future date, commonly 1, 3, 6 and 12 months but also for longer dated tenors or dates into the future (see table above). Forward contracts are an important part of many swap arrangements.

Options (O)
This gives the holder the right, but not the obligation, to buy or sell gold at a pre-determined price by an agreed date, for which he pays a premium (or a cost). The premium is the amount of compensation the seller receives from the buyer. The right to buy is commonly referred to as a call option and the right to sell as a put option.