Intercontinental Exchange Unit to Manage New Daily Gold Price

LONDON--The London Bullion Market Association on Friday said it has selected ICE Benchmark Administration, or IBA, to manage a new, electronic daily gold price that will replace the system that's been in operation since 1919.

The LBMA and IBA, a unit of Atlanta, Ga.-based Intercontinental Exchange Inc., aim to have the new LBMA Gold Price mechanism go live in the first quarter of 2015, the LBMA said in a statement. The benchmark is used by a range of firms, including mining companies and exchange-traded funds.

The choice means that three different companies are now setting the daily prices for London's three main precious metals markets. In October, the London Metal Exchange--a unit of Hong Kong Exchanges & Clearing Ltd, won a bid to manage the platinum and palladium fixes and earlier this year, CME Group Inc. with Thomson Reuters Corp. won the right to manage an electronic silver price.

The shake-up in the precious metals markets came after regulators began scrutinizing the closed-door calls that were being used to establish the daily price fixes, part of broader investigations into a number of global benchmarks, including the London interbank offered rate or Libor, that have seen banks punished with fines of billions of dollars.

Since 1919, the gold benchmark has been set through a private arrangement among members of London Gold Market Fixing Ltd. At the moment, four banks meet on twice-daily conference calls: Bank of Nova Scotia-ScotiaMocatta, Barclays Bank PLC, HSBC Bank U.S.A., and Société Générale SA. The new electronic system will replace this telephone fix.

The LBMA said IBA will provide the price platform, methodology as well as the overall administration and governance for the LBMA Gold Price.

LBMA chief executive Ruth Crowell said in the statement that 11 entities intend to provide the data that will be used to establish the daily gold price, although she said they all still need internal compliance approval to participate.

The ICE proposal was selected from a shortlist of five firms. The other bidders were Autilla Ltd. with Sapient Corp.; CME Group Inc. with Thomson Reuters Corp.; EBS Service Co. Ltd., a unit of ICAP PLC; and the London Metal Exchange, a unit of Hong Kong Exchanges & Clearing Ltd.

London is the world's largest trading center for precious metals. Total demand for gold last year was $184 billion, according to the World Gold Council.

Write to Matthew Cowley at [e-mail]

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