ICE to Supervise LBMA Silver Price Benchmark
July 14 2017 - 2:29PM
Dow Jones News
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
alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
July 14, 2017 14:14 ET (18:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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