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By Frank Tang and Clara Denina
NEW YORK/LONDON, April 30 Deutsche Bank's
exit from the London precious metal fixes will leave
just two banks running a century-old system that sets the global
silver price, likely stirring the debate about regulation of one
of the most volatile commodity markets.
The bank's decision on Tuesday to resign its seat ends an
unsuccessful four-month search for a buyer, as U.S. lawsuits
alleging gold price-rigging by the five banks that set the
benchmark turned potential suitors cold, sources said.
"You can't have a silver fixing with just two people, that's
a bit of a nonsense really," a London-based precious metals
trader said, adding just two participants would restrict
liquidity and competition.
"It would just be two people talking to each other. I think
the regulator should be stepping up a little bit here."
Leaving Scotiabank and HSBC as the only
remaining members of the silver pricing committee will likely
renew scrutiny of a daily system whose roots go back to the
smoky, boisterous coffee houses of 19th-century London.
The modern process, which started in the 1960s, is now run
by telephones and is largely similar to the twice-daily gold
Shortly before news of Deutsche's withdrawal on Tuesday,
Britain's financial watchdog, the Financial Conduct Authority
(FCA), said it could intervene if there were too few
participants in commodity benchmarks such as gold and silver.
"If there is a risk of dislocation because people are
withdrawing and we think that breaches or is a risk to our
objectives, then we would set that as one of our activities but
it is not entirely straightforward," head of enforcement and
financial crime Tracey McDermott said on Tuesday.
The FCA was not immediately available for further comment on
The gold fix, along with other commodity benchmarks, has
come under increasing scrutiny by regulators in Europe and the
United States since the London Interbank Offered Rate (Libor)
manipulation case last year.
The International Organization of Securities Commissions
issued guidance in July covering all benchmarks that are central
cogs in the global economy, from interest rates to equities and
At least a dozen U.S. private plaintiff lawsuits accuse the
five banks in the gold fix committee of manipulating the price
of the metal.
Those lawsuits have not targeted the silver fix, which
started in 1897, about a quarter of a century before gold.
Even so, the silver futures market, whose prices have
gyrated wildly in recent years, is no stranger to regulatory and
In a five-year probe, the U.S. Commodity Futures Trading
Commission investigated allegations that some of the world's
biggest bullion banks including JPMorgan Chase & Co
distorted silver futures prices.
After 7,000 staff hours of investigation, the U.S. commodity
regulator found no evidence of wrongdoing and dropped the probe
The banks faced similar accusations in a long-running class
action antitrust lawsuit that was dismissed at the end of last
month by a federal appeals court.
Whatever the outcome of the latest scrutiny, some users,
including mining companies, which hedge production against the
benchmark, may have little choice for now but to rely on it even
with just two members.
"Whether it is good or bad or if it is down to two members,
we have to use it," said Ounesh Reebye, vice president of metal
sales at mining company Silver Wheaton, which is expected to
produce 36 million ounces of silver this year.
(Additional reporting by Josephine Mason and Jan Harvey;
Editing by Josephine Mason, Steve Orlofsky and Mark Potter)