What will be the golden ruling on London's bullion market?

London's streets were rumored to be paved with gold, once upon a time. Now they seem to be paved with chit-chat and hearsay regarding the future of the City's bullion trade.

Now, not to repeat myself, but the London bullion market is currently in a state of transition. To what, exactly, is anyone's guess. Over-the-counter to exchange, maybe, if the London Metal Exchange can get its hands on it.

Disclaimer: all of this is basis analysis of high-level conversations with senior market participants. Nothing is yet publicly known and no parties mentioned in this blog will comment. Paranoia, maybe. Non-disclosure agreements, most certainly.

So, the London Bullion Market Association 'request for proposal' rattles on.

Most have little time to give to the process, as they have businesses to run.

The five parties rumored to be in the final beauty parade are: CME Group, the LME, IntercontinentalExchange, Autilla/Cinnobar and Markit/ABS.

No comments all round. As such, chatter prevails. Here are the most recent musings:

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The LME is aggressively gunning for the London market. "At any cost," according to one senior source.

The LBMA needs to keep London relevant. A deal with the LME — which is owned by Hong Kong Exchanges and Clearing — would mean a direct link to the Chinese market, the world's number one gold consumer.

Then there's CME. At the moment it faces a slight uphill battle, owing to some reputational damage linked to recent hiccups related to the LBMA Silver Price(opens in a new tab) (operated and administrated by CME and Thomson Reuters).

However, CME operates the world's largest gold exchange by volume.

One source said the market will gravitate to where the largest pool of liquidity is, that being COMEX.

However, a banker said he would see a CME win as a step backward, rather than forward. "The Chinese are buying the gold; why would London want the US to dominate the space?" he said.

Still, it is worth noting that CME does have exposure to Asian markets.

In late 2014 the Shanghai Gold Exchange and CME signed a memorandum of understanding to "positively explore possibilities of cooperation between the domestic and international markets."

Also, CME launched a physically delivered Gold Kilo futures contract in Hong Kong in early 2015.

The result of the RFP should create a platform that creates future growth for the London market.

"[The] LBMA intends for the new services to be able to support the introduction of future services — for example over-the-counter clearing — subject to the appropriate market regulatory conditions and LBMA membership demand," the industry body said on its website.

In a recent interview with Platts, LBMA CEO Ruth Crowell suggested any solution could come about from various partnerships of the entities involved.

Still, one source shrugged that off entirely.

"Do you really believe anyone in the rumored list would want to work with the next one?" he said.

There still seems to be a strong belief that the LME's determination to run the London gold market keeps it in the number one slot to win the bid.

The LBMA would own the intellectual property of any successful RFP candidate's technology platform.

LME Clear is already set up and approved to clear precious metals. The exchange included precious metals in its requests for regulatory approvals when it set up the clearing house.

One banker said that "LME are set up for their own thing. But we still want the LBMA to ask the members what we want before being lumped with a choice from the good, the bad and the ugly again."

ICE, ABS and Autilla also have support. But their voices seem to being washed aside by the banging of the LME drum.

One trader thinks that of all the candidates, ABS has the best understanding of the market.

There was also growing support for Autilla's technology.

"Autilla has the best platform as it was built by traders for traders who knew what the real needs are. ABS is not a bad shout, too, but I think [the fact they are] based in Asia may cause some issues," said a banker.

ABS and Autilla are both technology companies, and not exchanges like the other three candidates.

Then there is the fear of fragmentation, possibly the worst signal London could send to the world.

"I don't really see the RFP leading to a cohesive solution unless they [the LBMA] give it all to one player," said one source.

Let us not forget, Dick Whittington found when he went to London that the streets were in fact grimy and poverty-stricken (according to Wikipedia at least).

Let's hope that's not the case and the London bullion market continues to shine.

To be continued.