The silver fix is finally out…
For over a hundred years, a group of bankers have met at the stroke of noon to “fix” the price of silver. Once they conspired with one another and decided what they think the price of silver should be, they publish their consensus to the markets and that is the gospel for metals that day…
That has finally come to an end. As of today, there is a new way of pricing silver. The London Bullion Market Association (LBMA) has partnered with the CME Group and Thomson Reuters to institute the new “LBMA Silver Price” mechanism. Three “accredited participants” are HSBC Bank USA NA, Mitsui & Co Precious Metals Inc and The Bank of Nova Scotia – ScotiaMocatta.
At the very least, the name is an improvement on the ‘Silver Fix’…as if there could be a more Orwellian name for the silver manipulation tool. While fix can mean “to fasten something securely in a particular place or position”, in the case of London Silver Price Fixing, it is far more like this definition: “Influence the outcome of something by illegal or underhanded means.”
But that’s not why they changed the name. The previous name just couldn’t be trademarked…
Here’s the official announcement from their press release:
CME Group, Thomson Reuters and LBMA have joined forces to provide the over-the-counter spot silver market with a new transaction-based price-setting mechanism for the LBMA Silver Price that is IOSCO-compliant and fully electronic. CME Group will provide the electronic auction platform on which the price will be calculated, Thomson Reuters will be responsible for administration and governance and the LBMA will accredit price participants. The new LBMA Silver Price benchmark will be published and distributed by Thomson Reuters and will be available on the LBMA’s website.
Here’s a quick rundown of what you need to know, from the LBMA website:
- The price fix time has not changed. It will continue to take place at 12:00 noon GMT every week day, and published shortly afterward.
- The price will be tradeable and expressed in U.S. Dollars per troy ounce.
- Thomson Reuters will distribute the LBMA Silver Price in real-time through market data systems. They will also provide access to the data through re-distribution via third party data vendors such as Bloomberg.
- The LBMA Silver Price will be decided by a electronic auction based solution — based on transactions — and is auditable. The LBMA Silver Price will be set by auction rounds with each round lasting 30 seconds. The auction will begin at 12:00pm and participants will input their buy volume and sell volume orders in lakhs (100,000 ounces) or quarter lakhs (25,000 ounces). The initial price at the start of the process is likely to be close to the spot price. In the first round the system algorithm will attempt to match buy and sell orders within the permitted tolerance level (3 lakhs). If the buy and sell orders are out of tolerance, the auction price will change and the auction will restart until the buy and sell volumes are in tolerance and the equilibrium price is set.
- In recent weeks the LBMA, CME and Thomson Reuters have engaged closely with all Silver Market participants who have expressed interest in contributing to the LBMA Silver Price. These include banks, trading houses, refiners and producers. Market Participants interested in contributing to the LBMA Silver Price are invited to email the LBMA at Ag.Consult@lbma.org.uk
You can monitor the silver price here.
For more coverage on the history of the Silver Fix, see this and this.
