New era of gold benchmarking to start with handful of pioneers

Wed Mar 18, 2015 8:01pm EDT
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* ICE Benchmark Administrator to replace gold fix on March 20

* Four chairs to rotate during first 6 months - source

By Clara Denina

LONDON, March 19 (Reuters) - A handful of banks will start setting gold prices electronically on Friday, sources with direct knowledge of the matter said, as Intercontinental Exchange completes a sweeping change to London's bullion benchmarks and dispenses with the century-old gold "fix".

Since 1919, representatives from four or five banks have agreed a twice-daily price on which their customers - producers, consumers and investors - could trade and value gold.

Sweeping reform triggered by a regulatory push for more transparency after the Libor interest rate-rigging scandal broke in 2012, saw banks stop acting as both data providers and market makers.

As financial institutions even considered pulling out of the fixing process, three different exchanges took on the challenge of setting the separate precious metals benchmarks.

ICE Benchmark Administration (IBA), a subsidiary of ICE , was chosen to provide a physically settled, electronic and tradeable auction for what will become the LBMA (London Bullion Market Association) Gold Price.

"Friday's move to electronic auctions and record-keeping...should repair outside perceptions of London's role in the market," said Adrian Ash, head of research at online dealer   Continued...