Not all participants in ICE gold benchmark will be in place ‘on day one’

Mar 12, 2015 - 11:11 AM GMT
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Some of the parties intending to participate in the new ICE gold benchmarking process may not be able to do so in the first auction on March 20, the LBMA has confirmed.

Internal sign-offs, regulatory procedures and credit lines with other participants may not be completed in time, it said.

“New participants unfortunately don’t have the framework in place like the current members of the London Gold Fix do,” an LBMA spokesman said. “The current members were ahead of the game on that front.”

“It’s fair to say that we will likely have more participants involved after the initial launch. We can’t guarantee that all interested parties will be there on day one,” he added.

The complex and rigorous regulations governing participants demand that they must all have direct credit lines with each of the other members, for example. This is in aid of a wider movement towards complete transparency across precious metals markets that have been dogged with lawsuits and claims of manipulation for some time now.

“I think it is fair to say there a lot of hoops for new participants to jump through,” the spokesman added.

It may therefore be days or even weeks after the new benchmarking system, which was awarded to ICE in November last year, goes live before a full roster of new direct participants that will set the twice-daily price of gold.

ICE declined to comment directly.

Among others, several Chinese banks are said to be interested in joining some of the traditional members of the current fix in the new system.

Rumours have circulated that one of those banks is Industrial and Commercial Bank of China (ICBC), one of the biggest banks in the world and a major participant in the gold market.

The LBMA Gold Price will formally replace the near-century-old London Gold Fix on March 20.

The twice-daily gold fix, which has been in operation since September 12, 1919, has come under increased regulatory and media scrutiny. A third-party operator is seen as a critical step in modernising the image of the benchmark process, while also providing enhanced transparency and compliance with legislation.

London-based ICE subsidiary ICE Benchmark Administration (IBA), which was established in April 2013 to administer benchmarks, will provide the price platform, methodology and overall administration and governance for the LBMA gold price.

Via IBA, ICE administers Libor and ISDAFIX, which is already Iosco-compliant. Some market participants stressed the importance of this in the eyes of both the LBMA and the UK’s Financial Conduct Authority (FCA).

(Editing by Mark Shaw)