30 years after Hunt bros, scramble to take over London silver fix
Amid investigations of manipulation and price-fixing, Deutsche Bank, became the first to resign from both the London Gold Fixing and Silver Fixing panels earlier this month May.
The lawsuits piling up and the ongoing probe by the UK financial regulator – and the first of what could be a slew of fines – meant that the German banking giant could not find any buyers for the seats.
Talks on how to overhaul the London Gold fix which has been used as a benchmark for the global physical trade in the precious metal for the past 95 years is still under discussion.
But the body responsible for administering the silver benchmark are ceasing operations on August 14 and the industry under the direction of the London Bullion Market Association (LBMA) is now scrambling to find a new price discovery and benchmarking.
Reuters reports there is no shortage of parties interested in taking over the silver spot pricing mechanism, including the news and financial date provider itself.
An attempt by the Hunt Brothers to corner the market sapped all liquidity
Market information provider Platts which is active in coal and iron ore price setting is also interested as is the Chicago Mercantile Exchange responsible for the bulk of futures trading in precious and base metals on US markets.
The London Metal Exchange, acquired last year by a Hong Kong-based exchange operator, is considered a frontrunner to take over the fix which is supposed to go from being an obscure process conducted via conference call between a handful of banks twice a day to a "robust transaction-based electronic system" to set the daily spot price.
The LME at the moment runs a limited clearing service for over the counter silver forward rates and it's not the first time the storied mostly base metals exchange which traces its roots back to the early 19th century, had plans to muscle in on silver:
"The LME operated a 10,000 ounce silver contract in the 1970s, which was suspended the following decade after an attempt by the Hunt Brothers to corner the market sapped all liquidity from the market, a trading source said.
"It considered re-launching a silver contract in the 1990s, but struggled against falling demand for the metal from the photography sector and a lack of industry support, the source added.
Silver futures in New York were last trading at $19.01 an ounce, little changed from 2014 opening levels. The contract hit a high of just over $48 an ounce in April 2011, still below the Hunt-induced spike to $48.70 in 1979, when the price increased 8-fold over less than a year. The Hunt saga ended on Silver Thursday in March 1980 when the price halved during a single trading session and the brothers could not cover a margin call.