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London silver fix to cease operating

Bnamericas Published: Wednesday, May 14, 2014

The London silver fix will cease to operate after close of business on August 14, the company that administers the process said on Wednesday.

Until then, Deutsche Bank, HSBC and Scotiabank – the three banks that set the global benchmark for spot silver prices – will continue to administer the price fix and liaise with the UK Financial Conduct Authority (FCA) and other stakeholders, the London Silver Market Fixing said in a release.

The move comes amid growing regulatory scrutiny of benchmark setting in bullion markets.

In April, Deutsche announced it was resigning its seat on the London gold and silver fixings process, but the bank will now stay on until the August deadline.

In a separate statement, the London Bullion Market Association (LBMA) said it is willing to assist with discussions among market participants, regulators and potential administrators with a view to exploring whether the market wants to develop an alternative price mechanism.

"As part of the consultation process, the LBMA will be actively approaching market participants requesting feedback," LBMA CEO Ruth Crowell said.

Ross Norman, CEO of broker Sharps Pixley, was quoted as saying by Bloomberg that "I suspect something will be developed that will enable an auction price to be achieved during the working day, taking the place of the fix and that will enable people to derive a benchmark figure, which is what the market needs.

"It's essential for the market. It's the only objective price."

REGULATORY REVIEWS

Against a backdrop of investigations into the manipulation of financial benchmarks in the wake of the Libor interbank rate scandal that broke in 2012, regulators have been looking into the setting of the gold and silver benchmarks.

In November 2013, the FCA launched a review into the possible manipulation of gold benchmarks and, in December that year, German banking regulator BaFin solicited documents from Deutsche as part of its investigation into the matter.

The London gold fix is set by a panel of five banks: Deutsche, HSBC, Barclays, Bank of Nova Scotia ​and Société Générale.

Meanwhile, the US Commodity Futures Trading Commission began investigating allegations of silver price fixing in 2008, but found in September 2013 that there was no basis for action.

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