London gold-fix banks accused of manipulation in US lawsuit-report

LONDON, March 5 Wed Mar 5, 2014 5:48am EST

LONDON, March 5 (Reuters) - Barclays, Deutsche Bank and three other banks have been accused in a lawsuit of manipulating the London gold fix, a benchmark used throughout the $20 trillion market for the metal, Bloomberg reported.

Kevin Maher, a New York resident who says he bought and sold gold and gold futures and options, sued in Manhattan federal court on Tuesday, the report said, alleging the five banks overseeing the century-old benchmark colluded to manipulate it.

According to the report, Maher is seeking to represent a class of all investors who, from 2004 to now, held or traded gold and gold derivatives that were priced based on the gold fix or who held or traded COMEX gold futures or options.

In a statement, Deutsche said it believed the suit was without merit and that the bank "will vigorously defend against it". Barclays declined to comment. The other banks involved in the fix - ScotiaMocatta, Societe Generale and HSBC - could not immediately be reached for comment.

Gold fixing happens twice a day in a teleconference between banks. At the start of each fixing, the chairman announces an opening price to the other members, who relay that to their customers and, based on orders received from them, instruct their representatives to declare themselves buyers or sellers at that price.

The price is adjusted up and down until demand and supply are matched, at which point the price is declared "fixed". The fixings are used to help determine prices globally.

Regulators including Germany's Bafin are looking more closely at how banks set benchmarks such as the gold fix after the Libor rigging scandal exposed widespread interest rate manipulation.

Maher is seeking unspecified damages on behalf of the class, Bloomberg said.

In January, Deutsche Bank said it was quitting the process after withdrawing from the bulk of its commodities business.

South Africa's Standard Bank, now selling a controlling stake in its markets unit to China's ICBC , is emerging as a frontrunner to buy Deutsche's place in the global gold price-setting process, sources familiar with the matter told Reuters last month.

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