LPPM WEEK 2017: Silver fix RFP closes, three parties selected – sources

May 17, 2017 - 1:56 PM GMT

The tendering process to identify an alternative provider to operate and administer the silver auction process closed on Monday May 15.

Three parties have been selected by the London Bullion Market Assn (LBMA), sources told Metal Bulletin during the annual LPPM Week in London this week. The bidders involved are two exchanges and one fintech company, Metal Bulletin understands.

“Those who submitted responses will be asked to present their submissions, which will be reviewed along with written responses, and following further discussions we would be looking to announce the chosen provider in the summer with an implementation date in the autumn,” the LBMA told Metal Bulletin.

CME Group and Thomson Reuters stepped down from their roles in the LBMA silver price auction in March this year.

CME and Reuters will continue to operate and administer the auction until a new provider is appointed, the LBMA said following the announcement.

CME and Reuters won the battle to provide the methodology and price platform for the daily process in July 2014, replacing the 117-year-old silver fix in August that year under sweeping reforms of the entire precious metals complex.

The silver fix, or benchmark as it is now known, is the global benchmark reference price used by central banks, miners, refiners, jewellers and the surrounding financial industry to settle silver-based contracts.

While some traders continue to use the 24-hourly traded spot price, larger players prefer the snapshot-style daily benchmark to settle bulkier contracts in a traditional over-the-counter (OTC) market.

The price is set every day by seven participants – HSBC, JPMorgan Chase Bank, the Bank of Nova Scotia, Toronto Dominion Bank, UBS, China Construction Bank and Morgan Stanley – using a system that has been run by CME and Thomson Reuters.

Last year, the credibility of the process was damaged after the LBMA Silver Price was set 84 cents below the spot and futures price.