February 4, 2016 / 4:17 PM / 2 years ago

UPDATE 1-Thomson Reuters, CME Group to develop silver benchmark further

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LONDON, Feb 4 (Reuters) - Thomson Reuters and CME Group introduced a package of measures on Thursday to further develop the silver benchmark, including the option of suspending the process if administrators believe its integrity is threatened.

The benchmark’s oversight committee has held two extraordinary meetings since last Thursday, when the LBMA silver benchmark settled more than 80 cents below the spot price.

Traders expressed concern after the auction that it was too easy for the benchmark to deviate from the current spot price.

The companies, who act as benchmark administrator and calculator respectively, said they had been working with the committee to address concerns. The Financial Conduct Authority (FCA) has been kept fully informed, they added.

New measures agreed between CME and Thomson Reuters, along with intellectual property holder the London Bullion Market Association (LBMA), include the suspension of the price-setting process if the administrators believe the integrity of the auction or participants is threatened.

They are also aimed at increasing the participation in the auction of firms that are not banks.

“This protocol has been in place since Friday January 29, 2016. All participants and the FCA have been informed of its implementation,” the companies said.

“In addition we look at the viability of introducing centralised clearing of all auction trades, to make the process easier and less capital intensive for participants.”

The committee, Thomson Reuters and CME Group will present details of the measures to participants, their clients and the FCA for discussion and implementation at the earliest opportunity, they said.

These may include a blind auction, where only prices and not volumes are disclosed to participants until after the auction has closed, and increasing the settlement tolerance where necessary to maintain the integrity of the auction.

Also on the table is a package of measures to increase participation in the benchmark process and to encourage non-banks’ participation, the companies said. (Reporting by Pratima Desai and Clara Denina; editing by Susan Thomas and Jan Harvey)

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