ICE to Supervise LBMA Silver Price Benchmark

By Alexander Osipovich 

Intercontinental Exchange Inc. will take over supervision of a key measure of silver prices, adding a new prize to the family of benchmarks run by the New York-based exchange operator.

ICE and the London Bullion Market Association said Friday that ICE, beginning in the fall, would begin running the daily electronic auctions that determine the LBMA Silver Price. CME Group Inc. and Thomson Reuters Corp. have jointly run the benchmark since 2014.

Formerly known as the silver fix, the benchmark is used by miners, precious metal refiners and commodity traders as a reference price in physical supply contracts. It's similar to the LBMA Gold Price, the former gold fix, which ICE has run since 2015. The two measures also set the price of some derivatives contracts and exchange-traded funds.

Until several years ago, both the gold and silver fixes were set in daily conference calls held by a small number of bullion-trading banks. But the decades-old process was dropped in favor of electronic auctions after it came under regulatory scrutiny. The Wall Street Journal reported in 2015 that U.S. officials were investigating at least 10 major banks over the possible rigging of precious metals markets.

Benchmarks set by groups of large banks came under scrutiny after a scandal erupted five years ago over the London interbank offered rate, or Libor, a reference rate that sets the price for trillions of dollars of derivatives contracts and borrowings world-wide.

Deutsche Bank AG, UBS Group AG and half a dozen other financial institutions have collectively paid billions of dollars over allegations that they manipulated Libor or related interest-rate benchmarks. Deutsche Bank and UBS both entered guilty pleas over their roles.

ICE, the owner of the New York Stock Exchange, has emerged as a main beneficiary of the push to clean up critical benchmarks. In 2014, it replaced the British Bankers' Association as the administrator of Libor, and it took over another troubled interest-rate benchmark, ISDAfix, now called ICE Swap Rate.

The LBMA is an industry group that represents a variety of bullion market players, including central banks and gold miners, and which owns the intellectual property rights to the gold and silver benchmarks. It had been looking for a new administrator for its silver price since CME and Thomson Reuters said earlier this year they would quit running it, citing new European regulations on benchmark regulation to take effect in 2018.

ICE beat out the London Metal Exchange, owned by Hong Kong Exchanges & Clearing Ltd., which had also been seeking to run the LBMA's silver benchmark, a person familiar with the situation said.

ICE Benchmark Administration, the unit that will handle the silver price, makes money by collecting a slice of the licensing fees paid by firms that use its gold and interest-rate benchmarks for their own products and activities.

Write to Alexander Osipovich at [e-mail]

(END) Dow Jones Newswires

July 14, 2017 14:14 ET (18:14 GMT)

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