UPDATE 1-CME Group throws down gauntlet in race to run gold fix

Thu Jul 17, 2014 9:06am EDT
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By Clara Denina and Jan Harvey

LONDON, July 17 (Reuters) - The Chicago Mercantile Exchange (CME) said on Thursday it would be happy to administer, with Thomson Reuters, the global price benchmark for gold known as the "fix", a day after banks effectively called time on the current arrangement.

The century-old gold fix is a standard price for the metal that banks set twice a day over the telephone. It is based on transactions between their clients such as central banks and mining companies.

Regulators have focused on the precious metal benchmarks since the Libor interest rate-rigging scandal broke in 2012. Some observers say the system for pricing the metals leaves it equally vulnerable to manipulation.

An official at Britain's Financial Conduct Authority told lawmakers this month that collusion among banks in setting the gold benchmark was possible, although there was no proof for now that it was happening.

The watchdog has studied the gold fix and fined Barclays 26 million pounds for failures in internal controls that allowed a gold options trader to manipulate the setting of gold prices.

London Gold Market Fixing Ltd, the company working on behalf of gold fixing banks Barclays, HSBC <HSBA.L,> Societe Generale and Bank of Nova Scotia, said it would ask for proposals so it could appoint a new administrator for the benchmark.

CME managing director of metals products Harriet Hunnable was first out of the blocks, saying the exchange would bid to be involved in a new process, which may turn the current twice-daily price-setting conference call into an electronic auction.   Continued...