* ICE Benchmark Administrator to replace gold fix on March
* Four chairs to rotate during first 6 months - source
By Clara Denina
LONDON, March 19 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
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
Banks will still submit orders during the process, as they
"I would like to think (there will be) more than the current
(four) ... but we'll have to wait and see," a source with direct
knowledge of the matter said.
Current providers of the gold "fix", Barclays, HSBC
, Bank of Nova Scotia and Societe Generale
, declined to comment on whether they will participate.
The issue around participation gained importance due to the
current regulatory environment, which aims to promote
transparency and inclusion during the setting of financial
benchmarks used by customers around the world.
"Not everybody realises the level of commitment that
participating in a benchmark requires, that's why the list (of
participants) you have today is shorter than envisaged," a
bullion banking source added.
The LBMA, which will retain intellectual property of the new
benchmark, had said that 11 entities intended to participate in
the new mechanism from the start.
Industrial and Commercial Bank of China, Bank of China
International and China Construction Bank, which are ordinary
members of the LBMA, were unlikely to be in the list of new
participants at this stage, the first source said.
When Chicago Mercantile Exchange, jointly with
Thomson Reuters, took over the administration of the
silver benchmark in August, just three entities were able to
join the electronic auction from day one. There are now six
The London Metal Exchange, part of the Hong Kong Exchange
has been running the platinum and palladium fixes from
December, with four participants.
ICE said it has appointed an independent chairperson who
will oversee the process, although it will look to develop an
algorithm at a later stage.
Four ex-bankers have been appointed as chairs and they will
rotate in their duty during the initial six months, a fourth
(Editing by Veronica Brown and David Evans)