By Matthew Cowley
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 has
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.
In a statement, ICE said its platform is already being used to
manage the Libor interest rate. ICE was chosen by the U.K. Treasury
to manage the key interest rate as a result of the earlier
scandals.
The LBMA said IBA will provide the price platform, methodology
as well as the overall administration and governance for the LBMA
Gold Price. ICE said participants will be able to provide prices in
three currencies: dollars, euros and pounds sterling. The price
will be set twice a day, at 10:30 a.m. and 3:00 p.m. London time
each day.
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 matthew.cowley@wsj.com
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