The World Gold Council (WGC) will be holding an industry discussion forum to explore reform of the London Gold Fix, it said in a release on Wednesday.
The first meeting will be held on July 7 in London.
The Financial Conduct Authority (FCA) will be attending as an observer and representatives of the bullion banks, refiners, ETF and other gold investment product sponsors, exchanges, industry bodies, central banks and mining companies will be individually invited to participate.
“The Fixing process was established almost a century ago, so it is not surprising that it needs to change to meet today’s market expectations for enhanced regulation, transparency and technology,” said Natalie Dempster, managing director, central banks and public policy at the World Gold Council.
“Modernisation is imperative in order to maintain trust across the industry. This could come in the form of reform to the Fix to bring it in line with the IOSCO principles, or it could see an alternative price benchmark emerge,” she added.
Following discussion with a number of industry participants, WGC has identified five principles to which any reformed Fix process or alternative should adhere.
The WGC believes the following characteristics, in addition to the IOSCO principles for financial benchmarks, are highly desirable for a modernised gold benchmark:
It should be based on executed trades, rather than quote submissions, it should be a tradeable price, not simply a reference one, the input data should be highly transparent, published and subject to audit, it should be calculated from a deep and liquid market, through which a significant volume of gold flows are transacted, and it should represent a physically-deliverable price, as many users want to take physical delivery of gold.
“Any reform or replacement of the Fix, must serve the needs of all market participants and meet today’s requirements for transparency, liquidity and independent oversight,” said Dempster.
Currently, Deutsche Bank, HSBC, Barclays, Société Générale and Scotia-Mocatta set the twice-daily gold fix, which has been in operation since September 12, 1919. The make-up of the group last changed in 2004 when NM Rothschild and Sons sold its seat to Barclays for a rumoured $1 million.
In May, the FCA fined Barclays 26,033,500 pounds for failings surrounding the fix. The bank failed to manage conflicts of interest between itself and its customers when a trader exploited the weaknesses in Barclays’ systems and controls to seek to influence a PM fixing in June 2012.
(Editing by Martin Hayes)