LBMA works to replace London silver fix

It looks like the vacuum that would be left by the coming demise of the venerable London Silver Fix on August 14 will be quickly filled.

The London Bullion Market Association (LBMA) has held a closed-door meeting with 140 members and other interested parties to present seven options to replace the daily silver fix, which started in 1897 but ran out of steam in recent months, as only two members — HSBC and Bank of Nova Scotia — were left to administer it after third member Deutsche Bank announced its exit from commodities.

The seven options relate to seven disparate organizations (a short list from 10 applicants) that are vying to become operators of the LBMA’s new official silver pricing mechanism: Autilla Ltd. (Cinnober Financial Technology of Sweden), Bloomberg, CME Group (Thomson Reuters), ETF Securities, Intercontinental Exchange, London Metal Exchange and Platts.

The LBMA has put summaries of the seven proposals on its website at: http://www.lbma.org.uk/_blog/lbma_media_centre/post/lbma-2014-silver-price-consultation-seminar/ .

The LBMA expects a market consensus will be announced in early July, after consultation with regulators. It says the solution provider will then develop the daily silver-price mechanism with assistance from the LBMA. After testing in early August, the solution will go live on Aug. 15, 2014.

In early June, the LBMA sent out a survey regarding the silver fix issue to its members and interested parties, and 440 participated in the survey. From the survey, the LBMA said the consensus was that the new silver-pricing mechanism “should be an electronic, auction-based solution. The solution must be tradeable, with an increased number of direct participants.”

The responses to the LBMA’s survey questions were: Q1 – For your current business model, how useful is the current London silver-price mechanism? The average score was 7.5 (out of 10); Q2 –  How often do you use the silver-price mechanism? Daily 64%, periodically 24%, never 7% and n/a 5%; Q3 – Is the silver-price discovery method sufficient? Yes 72%, no 28%; Q4 – Would you consider acting as a contributor? Yes 25%, no 44% and maybe, 31%.