New automated silver price fix mechanism announced

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CME Group and Thomson Reuters system is auction-based and auditable.

The London Bullion Market Association (LBMA) has announced that CME Group and Thomson Reuters have been selected to set the daily silver price – the Silver Fix – through an automated, audited and tradeable mechanism.

The new follows market consensus gained during a consultation period run by the LBMA, involving two market surveys, a seminar and numerous meetings with market participants, solution providers and regulators.

The LBMA reports the second survey “indicated a clear market consensus for the CME Group & Thomson Reuters proposal”. It is understood that the price mechanism meets the LBMA Request for Proposal process criteria as it is electronic, auction-based and auditable. It is also a tradeable system with an increased number of direct participants. The criteria was based on the feedback provided from market participants who contributed to the first survey.

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CME Group will provide the price platform and methodology for the fixing, while Thomson Reuters will provide the administration and governance. The LBMA is set to develop a process of accreditation for silver price participants. The legal aspects of this division of responsibilities will be finalised prior to go live. In the meantime the LBMA will work closely with the CME Group and Thomson Reuters to prepare the London Silver Price mechanism for testing in early August.

The LBMA chief executive Ruth Crowell said: “I am delighted that there was a clear market consensus for the CME Group & Thomson Reuters joint proposal. The LBMA liaised throughout the consultation process with the FCA. The LBMA is grateful for all the support, comments and feedback it has received from all market participants. A particular thank you to ISDA, and the Silver Institute for all their constructive support of the LBMA during this consultation process. We will work in partnership with the CME Group, Thomson Reuters and price participants to implement the solution in time for testing in early August and go live on the 15th August.”

There has been suggestion that the London Gold Fix may also follow a similar switchover or mechanism after the four banks involved in fixing the daily price – Barclays, HSBC, Société Générale and Scotiabank – said they were seeking an automated mechanism to take over.

According to a report by Reuters dated July 16 2014, London Gold Market Fixing Ltd, which is owned by the four banks, is “seeking a third party” to take over the administration of the daily gold fix, replacing the 100-year-old process it has used to date. It is understood that the organisation has commenced a request for proposals (RFP) process with a view to appointing a new administrator for the fix.
 

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