* Deutsche negotiating sale of fixing seat since January
* U.S. investors, traders have filed 17 suits against fixers
* Increased scrutiny could complicate fixing process
By Clara Denina and Jan Harvey
LONDON, April 25 Deutsche Bank may end up
resigning its seat on the London gold fix rather than selling it
as U.S. lawsuits alleging price rigging against the five banks
that set the benchmark deter potential buyers, industry sources
Over the past two months, U.S.-based investors and traders
have filed nearly 20 separate antitrust claims accusing Barclays
, Deutsche Bank, HSBC, Bank of Nova
Scotia and Societe Generale of colluding to
manipulate the gold price.
At the time the initial suits were filed, Societe Generale
called the claims "unsubstantiated", and Deutsche Bank described
them as "without merit".
Barclays and HSBC have repeatedly declined to comment, while
Bank of Nova Scotia has not responded to requests by Reuters for
The court cases are complicating negotiations that Deutsche
Bank had started with potential buyers after it announced in
January it was putting its seat at the fix up for sale, a source
with knowledge of the matter said.
"Which institution would want to buy the Deutsche seat
knowing about all these lawsuits for manipulation?" the source
"Nobody will buy it until the cases are resolved, as these
may mean inheriting a reputational risk that in the current
regulatory environment, frankly, nobody wants."
The gold fix, a benchmark widely used across the industry,
is set twice a day by the five banks, which get together over
the telephone to work out a standard price for the metal based
on transactions between their clients.
Industry sources said only a handful of candidates had
emerged to buy Deutsche's seat, mostly Asian banks looking to
raise their profile in the London market.
South Africa's Standard Bank, in conjunction with
China's ICBC, at one stage was indicated as being in
prime position to buy the seat, but its interest seems to have
gone cold, a second source said.
"It doesn't look like that is going to result in anything
Deutsche Bank and Standard Bank declined to comment for this
It is unlikely that any residual liability would be passed
on to a buyer, because the banks are named individually in the
U.S. cases, but any potential bidder still will want to start
with a clean slate, the sources said.
"It seems unlikely that an independent, arm's-length buyer
of a seat on this market would inherit the liabilities of a
previous holder, although this would depend not only on market
rules but also on the law applicable to any claims made," Robert
Finney, a partner at law firm Holman Fenwick Willan, said.
Increased regulatory scrutiny, on the other hand, is "going
to be significantly disruptive to the London fix process", said
Reynolds Porter Chamberlain's head of financial disputes, Tom
The gold fix, along with other commodity benchmarks, has
come under growing scrutiny by regulators including Germany's
Bafin, Britain's Financial Conduct Authority and the U.S.
Commodity Futures Trading Commission since the Libor
manipulation case last year.
The pressure stemming from expected regulatory changes has
also raised questions on whether other banks currently sitting
at the gold fixing table may decide to resign.
Barclays on Tuesday said it would keep its gold-trading
business while hiving off most of its global commodities
operations and that its gold fixing activity "was business as
usual for now".
After the Libor (London Interbank Offered Rate) scandal, the
International Organisation of Securities Commissions - a global
umbrella group for market regulators - detailed a series of
principles with which any institution providing a financial
benchmark should comply. It set a deadline of July 2014.
The Gold Fixing Company, which represents banks involved in
price settlement, is undertaking a review to ensure the gold fix
complies with those benchmark principles.
"(For Libor and foreign-exchange litigation) people would
quite like to wait and see what the regulators find, because
they obviously will have got a very large amount of documentary
material and will make reference to it in their decision
notices," Hibbert said.
"That's obviously missing here, because the regulators have
not issued a formal investigation in relation to the gold price,
although there is a lot of noise about it," he added.
If no buyer is found, fixing could potentially continue with
four members. Deutsche is also resigning from silver fixing,
leaving only Bank of Nova Scotia and HSBC involved in that
The sources suggested a deadline either for a deal or for
Deutsche Bank to resign would come within months.
"From a risk-management point of view, if Deutsche Bank
wants to get out of the business, it may just retire, and then
the Gold Fixing Company will have to figure out how to fill the
spot," said Axel Merk, president and chief investment officer of
California-based Merk Funds.
(Additional reporting by Frank Tang in New York; Editing by
Veronica Brown and Dale Hudson)