* Silver fix to cease after Aug. 14
* Electronic alternative may be answer to silver "fix" loss
* Exchange-based solution possible
By Clara Denina and Jan Harvey
LONDON, May 14 The collapse of London's
historic silver price benchmark under regulatory pressure could
soon result in an electronic alternative, with technology
providers already checking ways to offer a transparent price
A number of technology providers have been investigating
ways to offer a more transparent way of disseminating
information that shows how the price of the $3.5 billion a day
silver trade is settled.
"We are working on an alternative proposal (to the silver
fix) already," one technology provider said.
The silver "fix" is set once a day with banks getting
together via telephone to agree a price, based on deals between
their clients. It is used by producers, consumers and investors
who use it to base contracts on.
But the process for setting silver and gold prices came into
sharp regulatory focus after the Libor (London Interbank Offered
Rate) rigging scandal exposed widespread interest-rate
manipulation in 2013.
The 117-year old London silver price benchmark's operator
delivered a surprise to customers on Wednesday, saying it would
stop administering the process on Aug. 14.
The London Bullion Market Association (LBMA) said it had
launched a consultation among market participants "to try and
ensure that there is something that replaces the silver fix."
Sources close to the matter said that the London Metal
Exchange (LME) would also be keen to provide the silver market
with an alternative solution to the "fix".
The LME currently provides a clearing of over-the-counter
silver forward rates in conjunction with London clearing house
LCH.Clearnet. The contract is marked to market using the LBMA
"We are always looking at ways to expand our product
offering, and are ready to expand our range of price discovery
and post-trade tools to further service the precious metals
market," the LME said in a statement.
The LBMA said it will approach miners and users of the
benchmarks, regulators and potential administrators requesting
One existing alternative to the benchmark could be the use
of future contracts listed on U.S. exchanges like the CME and
NYSE Liffe. The latter has a 1,000-ounce contract that attracts
reasonable volumes. CME's main contract is 5,000 ounces.
CME was not immediately available to comment.
(Additional reporting by Veronica Brown in London and Josephine
Mason in New York. Editing by Veronica Brown and David Evans)