UPDATE 1-And then there were 2: Deutsche exit renews scrutiny of silver fix

Wed Apr 30, 2014 10:08am EDT
 
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(Adds comment 3rd, 4th paragraphs)

By Frank Tang and Clara Denina

NEW YORK/LONDON, April 30 (Reuters) - Deutsche Bank's exit from the London precious metal fixes will leave just two banks running a century-old system that sets the global silver price, likely stirring the debate about regulation of one of the most volatile commodity markets.

The bank's decision on Tuesday to resign its seat ends an unsuccessful four-month search for a buyer, as U.S. lawsuits alleging gold price-rigging by the five banks that set the benchmark turned potential suitors cold, sources said.

"You can't have a silver fixing with just two people, that's a bit of a nonsense really," a London-based precious metals trader said, adding just two participants would restrict liquidity and competition.

"It would just be two people talking to each other. I think the regulator should be stepping up a little bit here."

Leaving Scotiabank and HSBC as the only remaining members of the silver pricing committee will likely renew scrutiny of a daily system whose roots go back to the smoky, boisterous coffee houses of 19th-century London.

The modern process, which started in the 1960s, is now run by telephones and is largely similar to the twice-daily gold fix.

Shortly before news of Deutsche's withdrawal on Tuesday, Britain's financial watchdog, the Financial Conduct Authority (FCA), said it could intervene if there were too few participants in commodity benchmarks such as gold and silver.   Continued...