By Francesca Freeman
The new London silver fix will emerge in July.
The London Bullion Market Association on Thursday laid out a
timetable to allay concern in the market about what happens when
the existing fix--a daily chat among a small coterie of banks--is
set for the final time on Aug. 14, after 117 years.
Bloomberg LP, ETF Securities, IntercontinentalExchange Inc., the
London Metal Exchange, commodities-information firm Platts and
electronic trading and pricing platform Autilla will all present
their ideas for a new fix to bullion industry participants at a
seminar in London on Friday, according to an agenda for the meeting
seen by The Wall Street Journal. CME Group Inc. (CME) and Thomson
Reuters Corp. (TRI) will present a joint proposal.
Members will be asked for feedback and to vote on which option
they prefer. The winner of this contest, expected to be announced
early in July, will then develop their mechanism with the
assistance of the LBMA, testing it in early August ahead of a
launch Aug. 15, the association said.
"The route that the market takes in choosing one proposal or the
other will determine the longer-term outlook for the London bullion
market as a whole," said Ross Norman, chief executive of
London-based bullion dealer Sharps Pixley. "People will welcome a
quick decision."
The fix provides a benchmark that is used to price metal sale
contracts and exchange-traded funds, totaling billions of dollars
each year.
The silver fix, which was first set in 1897, was killed off in
April when Deutsche Bank withdrew from the process as part of a
wider retrenchment of its commodities business. This left only two
banks on the fixing panel-- Barclays PLC and HSBC Holdings
PLC--rendering the process unviable, according to people familiar
with the matter. The LBMA's effort to find an alternative to the
current benchmark comes as market regulators have been scrutinizing
benchmarks across the financial sector in the wake of a global
scandal involving the rigging of interest rates.
The lineup of candidates for the new silver fix was greeted with
cautious optimism in the market, but some expressed concern about
the tight time frame.
"The exchange-based offerings look to be pretty solid," said
Robin Bhar, head of metals research at Société Générale. "When
replacing something that is been going over a hundred years, you
want to be damn sure that what you're replacing it with is a
state-of-the-art system and methodology."
Courtney Lynn, treasurer of Coeur Mining Inc., the largest
listed U.S. primary-silver producer, agreed.
"There are a couple of firms that clearly seem to have existing
infrastructure that would accommodate a new alternative, such as
the exchanges and Bloomberg," said Ms. Lynn.
Coeur Mining uses the silver benchmark to price supply deals, as
well as hedge its exposure to market volatility. The uncertainty
over the silver fix has recently led the firm to price hedging
contracts that settle after Aug. 14 off the Comex silver futures
contract in the U.S., said Ms. Lynn. Once a new silver fix is in
place, the company plans to return to pricing deals off the London
benchmark, she said.
Still, getting everything in place before Aug. 15 "is going to
be a bit of a scramble," she said.
Bloomberg, Thomson Reuters and Platts, a McGraw Hill Financial
Inc.-owned company, all 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 francesca.freeman@wsj.com
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