LBMA-With gold benchmark fixed, OTC trade eyed as next reform milestone

Mon Nov 10, 2014 2:00am EST
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* Precious metals benchmarks revamped in 2014

* Bullion market transformation at infant stage

* Clearing trades on exchanges could be next step

By Clara Denina

Nov 9 (Reuters) - Calling time on London's century-old gold "fix" could mark the beginning of an even wider industry overhaul that may ultimately dilute the dominance of the highly profitable bilateral over-the-counter trading.

London's bullion price benchmarks, or fixes, were transformed in a matter of months this year as regulatory scrutiny and accusations of market manipulation made price-setting among a handful of banks untenable.

The overhaul spawned electronic price setting platforms for gold, silver, platinum and palladium, with gold's fate sealed just last week when Intercontinental Exchange were announced as administrators for the prized bullion benchmark in early 2015.

So, no more telephone calls between four banks twice a day, but an automated and audited process that should guarantee that customers, including producers, refiners and central banks, continue to have a reference price that values their holdings.

The changes were brought in to reduce any risk of price manipulation, such as that found in lending rates between banks with the LIBOR scandal in 2012.   Continued...