* Deutsche in talks with prospective buyers -sources
* Seeks clarification on market-maker status for buyer
* Asia banks seen in the frame but fix seen as hard sell
By Clara Denina and Jan Harvey
LONDON, Jan 24 Deutsche Bank is talking with
prospective buyers about selling its place in the global gold
and silver price setting process, known as the "fix", sources
familiar with the situation said on Friday.
Deutsche said on Jan. 17 it would seek a buyer for its
fixing seat, which it had held since 1994 after buying Sharps
Pixley from Kleinwort Benson.
The move follows its recent decision to withdraw from the
bulk of its commodities business. Also European regulators have
launched investigations in recent months into suspected
manipulation of precious metals prices by banks.
Sources said talks are at an early stage. Meanwhile, the
bank is asking the London Bullion Market Association (LBMA) for
clarification on whether a buyer would have to be one of the
LBMA's market-making members, who quote two-way prices to each
other during the London business day for agreed minimum
quantities, they said.
A Deutsche Bank spokesman declined to give any update on the
situation to date.
"The key issue ... is whether or not the new fixer needs to
be a market maker. They will be looking for a company with
stature and credibility and not necessarily just the best price
- someone who will add status to the fix," one industry source
If the buyer does not have to be a current market maker, it
increases the likelihood that a candidate could emerge from
Asian banks looking to raise their profile in the London market.
Asia is taking a more important role in the gold industry as
supplies of physical metal move eastward.
Bank of China (BoC) and Industrial and
Commercial Bank of China (ICBC) have both already
become members of the LBMA. ICBC is also about to complete the
acquisition of the London commodity arm of Standard Bank
, another member of the London Bullion Market
Both banks declined to comment on whether they are
interested in joining the fixing group.
Four other banks are currently involved in the gold fixing
process - Bank of Nova Scotia-ScotiaMocatta, HSBC Bank
USA, Societe Generale and Barclays - and the
first two are also involved in fixing silver.
N.M. Rothschild and Sons was the last fixer to sell its
seat, to Barclays in 2004. According to market sources, the sale
took place for around 1 million pounds ($1.7 million).
Selling the fixing seat may be a tough task as the
price-setting process, along with that for other commodity
benchmarks, has come under increasing scrutiny from regulators
including Germany's Bafin, the UK's Financial Conduct Authority,
and the U.S. Commodity Futures Trading Commission over the past
12 months, after the London Interbank Offered Rate, Libor, was
rigged by British banks.
The fixing process takes place twice a day, at 1030 and 1500
Members relay net interest from clients, based on orders
placed with their dealing rooms, to the other fixers, who adjust
prices up and down until buy and sell orders are matched. At
that point, the price is declared 'fixed' and all orders are
Gold market participants insist that the fix is transparent.
"The fixing is unlike a currency fixing or a Libor
determination in that it is based on actual transactions,
physical flows," one gold market source said.