* Silver fix to cease after August 14
* Deutsche Bank says postpones resignation from silver fix
* Alternatives being sought, customers surprised by its
By A. Ananthalakshmi and Clara Denina
SINGAPORE/LONDON, May 14 The 117-year old London
silver price benchmark - or fix - will cease on Aug. 14, its
operator said, as regulatory scrutiny of price-setting
intensifies across markets.
The fix is set once a day by banks getting together via
telephone to work out a price, based on deals between their
clients. It is used by producers, consumers and investors who
use it to base contracts on.
The announcement by the London Silver Market Fixing Ltd on
Wednesday left a question mark over the role of a benchmark,
which could be replaced an electronic alternative.
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."
"We don't have a lot of time until August 14," a spokesman
said. "We will be talking to people who can help administer."
The LBMA said it will approach miners and users of the
benchmarks, regulators and potential administrators requesting
Some users said they were taken aback by the silver fix
"I'm a customer of the fix, and I have to say, I'm
completely in the dark about this," one precious metals trader
Players have been investigating ways to offer a more
transparent way of disseminating information throughout the gold
and silver fix. Over the past few months bullion banks have been
contemplating a move to electronic platforms to respond to
tighter regulatory requirements.
A source close to Britain's Financial Conduct Authority
(FCA) said it was pursuing frequent talks with the
administrators of price benchmarks.
"You are likely to see an increased professionalization of
benchmarks as an industry," the source said.
The London Metal Exchange (LME) currently distributes gold
and silver forward rates on behalf of the London Bullion Market
"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.
DEUTSCHE POSTPONES RESIGNATION
The gold and silver fixes, 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.
Deutsche Bank's decision earlier this year to leave the fix
process raised questions about its future as a process.
The banks are also facing lawsuits accusing them of alleged
gold price manipulation.
The lawsuits have not targeted the silver fix, but in a
five-year probe the U.S. Commodity Futures Trading Commission
investigated allegations that some of the world's biggest
bullion banks distorted silver futures prices.
After 7,000 staff hours of investigation, the regulator
found no evidence of wrongdoing and dropped the probe last
Deutsche Bank AG, HSBC and Bank of Nova
Scotia will continue to participate in the fix until
the August deadline, London Silver Market Fixing Ltd said
The period until then would be used for adjustment, with
consultation between clients and market participants.
Deutsche Bank's resignation in April from its gold and
silver fixing seats left just HSBC and Bank of Nova Scotia to
A source familiar with the situation told Reuters that
Deutsche Bank had postponed its resignation, responding to a
specific request from Britain's Financial Conduct Authority
"The other banks may have indicated to the regulator that
they were looking to withdraw as well and so to make this an
orderly affair Deutsche was asked to postpone the date of
resignation," the source said.
(Additional reporting by Jan Harvey; Editing by Veronica Brown
and William Hardy)