LME, Others Vie to Replace London Silver Fix

Ten different groups are vying to replace the historic London silver fix, according to the London Bullion Market Association.

The LBMA said Friday it will whittle these down in the coming days to a shortlist that will be invited to a meeting in London on June 20 where they will present their plans to the LBMA's 76 members, which include banks, metals refiners and miners.

Among those in contention are the London Metal Exchange, exchange-traded fund provider ETF Securities, commodities information provider Platts--all of whom have said they have applied to replace the fix. Financial information company Thomson Reuters Corp. has also submitted a proposal, a person familiar with the matter said, while CME Group Inc. recently declared an interest although it is unclear whether it made a formal proposal to the LBMA.

"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, managing director of metals at CME Group, said in a statement last month.

The fix is a 117-year-old daily ritual that provides a benchmark that is used to price, for example, mining sales contracts and exchange-traded funds. In recent years, the fix has been set daily at noon following a conference call by representatives of Barclays PLC, HSBC Holdings PLC and Deutsche Bank AG. But the benchmark will be set for the final time in August, following Deutsche Bank's decision earlier this year to resign from the fixing panel as part of a wider retrenchment of its commodities business. According to people familiar with the matter, the process was deemed unviable with only two panel members.

The LBMA's effort to find an alternative to the historic benchmark comes as the silver fix and a similar process for setting the benchmark price of gold come under the scrutiny of regulators as part of a broader examination of financial benchmarks in the wake of a global scandal involving the rigging of interest rates.

The LBMA said June 6 that a survey of around 440 market participants showed a clear desire for an electronic, auction-based benchmark with an increased number of contributors.

ETF Securities told The Wall Street Journal earlier in June that its proposal was along these lines. Platts has made a similar proposal, according to a person familiar with the situation.

One of the key ingredients for a successful replacement to the London silver fix will be its attractiveness to market participants as a platform for physical trade, said Adrian Ash, head of research at gold and silver dealer BullionVault.

"The issue with the fix is it is a benchmark in hindsight," Mr. Ash said. "It doesn't exist to create a reference price, it exists as a dealing point."

Thomson Reuters and Platts, a McGraw Hill Financial Inc.-owned company, compete with News Corp's Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires, on business news.

Write to Francesca Freeman at [e-mail]

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