Major metals exchanges vie for London Silver Fix 2.0

Two heavyweights among commodity exchanges say they are working with the LBMA to make a new Silver Fix once it expires in August.

Author: Clara Denina
Posted: Thursday , 29 May 2014

London (Reuters) -

Major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix", after the century-old system for setting the globally recognised price is disbanded in August.

The Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME) both said on Thursday they were working with the London Bullion Market Association (LBMA) and the precious metals industry to find an electronic-based solution.

"We are working closely with the precious metals industry and the LBMA to reduce market disruption by helping to find a robust transaction-based way to set the daily spot price, so the markets can continue to work efficiently and seamlessly," Harriet Hunnable, CME managing director of metals products, said in a statement.

Meanwhile, the LME said it had received numerous requests from industrial and financial players to provide a new solution.

"The LME ... is working with the LBMA in consulting with the market ... it has defined a robust process for a daily silver price, which will provide best-practice regulatory compliance while maintaining the global position of the London market," the exchange operator said in a statement.

Earlier this month, London Silver Market Fixing Limited said it would stop administering the benchmark on Aug. 14.

The move to disband the silver fix came after Deutsche Bank , a member of the gold and silver fix for two decades, failed to attract a replacement after putting its seats up for sale.

Greater regulatory scrutiny is forcing major changes in how all precious metals prices are set, and sources say an electronic alternative to the silver benchmark will probably be applied to the other 'fixes'.

LBMA officials could not immediately be reached for comment.

The LBMA has launched a consultation to find a solution, which will close on Friday. It has asked mining companies, users of the benchmarks, regulators and potential administrators for their views on who the ideal contributors to a revised pricing mechanism would be.

The LME said, "Our proposed solution will be announced at the appropriate time once the market consultation is complete."

Industry sources said that commodity price benchmarks provider Platts and news agency Thomson Reuters are also in talks with the LBMA and looking to provide feasible solutions to the market.

Both companies declined to comment.

On Friday, Barclays Plc was the first bank to be fined by the British regulator over attempted manipulation of the 95-year-old London gold market daily "fix".

The Financial Conduct Authority charged the bank 26 million pounds ($43.8 million) for failures in internal controls that allowed an options trader to manipulate the setting of gold prices. (Additional reporting by Veronica Brown, Silvia Antonioli and Jan Harvey; Editing by Susan Thomas and Jane Baird)

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