LBMA names Morgan Stanley as gold, silver market maker

Thu Oct 16, 2014 1:43pm EDT
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By Frank Tang

NEW YORK Oct 16 (Reuters) - The London Bullion Market Association (LBMA) said on Thursday it appointed Morgan Stanley as a market maker, underscoring the ambitions of some banks to expand into precious metals trading while others exit due to stringent regulations.

LBMA said it named Morgan Stanley & Co International Plc, a unit of U.S. investment bank Morgan Stanley, as a spot and options market-making member effective Thursday.

Currently, LBMA has 13 market makers which serve in either one, two or all three of the spot, options and forwards markets. They make markets by quoting two-way prices in both gold and silver products to other market makers.

Just three weeks ago, LBMA named Citigroup as a spot market-making member.

With the exception of Morgan Stanley and Citi, other global banks have mostly reduced exposure to gold and silver trading, driven by increased scrutiny of precious metals 'fixes' by European and U.S. watchdogs in the wake of benchmark manipulation in other financial markets.

In August, the LBMA began a new silver benchmarking process that is electronic, auction-based and auditable. The process is operated jointly by the Chicago Mercantile Exchange, which provides the platform and algorithm, and administrator Thomson Reuters.

The LBMA in September formally started the process to find a new administrator for the century-old mechanism that will halt the telephone call that four institutions entered twice a day in favor of an electronic solution.

On Thursday, the London Metal Exchange, owned by Hong Kong Exchanges and Clearing Ltd, said it will take charge of London's platinum and palladium pricing, also known as "fixes," from Dec. 1. (Reporting by Frank Tang, editing by G Crosse)