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(Updates with details on LBMA consultation, paragraphs 16-17)
By Clara Denina and Jan Harvey
LONDON, May 16 (Reuters) - London's precious-metal price benchmarks, including silver, the century-old gold "fix" and platinum group metals are on the verge of major transformation, industry sources say, as regulatory scrutiny and lawsuits hasten action.
Customers of the daily London silver fix, used as a global benchmark, were shocked this week when its operator said it would stop administering the 117-year-old process on Aug. 14.
The move came after Deutsche Bank, a member of the gold and silver fix for two decades, failed to attract a replacement after putting its seat up for sale.
While the development looked abrupt to customers, watchers of the backdrop around benchmarks after the Libor rate-rigging scandal see change as inevitable.
"The future of benchmarks and how they are being put together is now in the balance," said Clive Furness, managing director of Contango Markets Ltd.
"I think it's essential that we have a set of proper, definitive guidelines for index creation and maintenance that are accepted around the marketplace. Hearsay reporting on markets is not good enough anymore," he added.
In years gone by, seats at the gold and silver fixing tables were a mark of distinction for a bullion bank, a sign that its business was deep and respected enough to take a hand in setting the leading global benchmarks.
Those days are gone.
"The banks don't want any aggravation from current regulatory scrutiny and they will drift away from it," a senior gold trader said.
Before Deutsche's exit, other precious metals institutions had pulled out of the benchmarking process, but had always found a buyer.
Increasingly, industry experts now believe regulatory scrutiny of the remaining four gold fixing banks - HSBC , Societe Generale, Barclays and Bank of Nova Scotia - will also see them capitulate.
Barclays, Societe Generale, Bank of Nova Scotia and HSBC declined to comment on the future of the gold fix.
A raft of regulators, including Bafin in Germany, Britain's Financial Conduct Authority and the U.S. Commodity Futures Trading Commission have indicated that they're looking at the gold fix.
The way the fix and other commodity benchmarks are set was brought into the spotlight by the collapse of Libor (London Interbank Offered Rate), a central cog in the global financial system and the subject of a lengthy investigation.
With a wind-down of silver's price benchmark under way, the London Bullion Market Association (LBMA) is approaching miners, users of the benchmarks, regulators and potential administrators to find a possible alternative before August.
In an online survey, the bullion association asks market participants whom they would consider as ideal contributors to a revised pricing mechanism.
"We will also be liaising closely with any companies who would be interested in contributing to the London Silver price as well as those interested in its administration," it said in a statement.
The LBMA is also considering outsourcing the administration of its gold forward offered rates to a third party as it prepares for the implementation of new benchmarking regulations from the International Organization of Securities Commissions.
Banks arrive at the gold fix through matching buy and sell orders during a twice-daily telephone call, which miners, jewellers and central and commercial banks use to trade gold.
The same process is applied twice daily to platinum and palladium, with a daily call on silver.
As the market searches for a replacement for the silver fix, technology providers and exchanges have also been investigating ways to offer a more transparent way of disseminating information on the price-setting process, or a possible substitute for it.
"We are working on an alternative proposal (to the silver fix) already," one technology provider said.
"It would still be an auction but rather than having a fixing company, we could just operate it as a market-maker solution run through a daily auction on an electronic platform."
Large exchanges including the CME and London Metal Exchange have also been mentioned as possible providers of an alternative to the fixes.
Market watchers say a number of U.S. antitrust lawsuits against the banks involved in setting the gold fix are also pressing the case for change.
"I think the big issue now is the reputational risk that has been done to the fixes as an equilibrium price," Sharps Pixley CEO Ross Norman said. (Additional reporting by Veronica Brown; Editing by Veronica Brown and Dale Hudson)