The London Silver Market Fixing Ltd. (LSMF) will stop administering the silver fixing that dates back over a century, after Deutsche Bank said it will stop contributing to the benchmark (the firm has also looked to sell its gold fixing membership after probes into the London gold fixing).
Prior to Deutsche Bank’s decision to drop out; three banks were involved in the price-setting ritual. HSBC Holdings PLC and Bank of Nova Scotia were the other two, and both are involved in the gold fixing.
LSMF will stop administration on August 14, and the Financial Conduct Authority (FCA) will work with the remaining banks. The London Bullion Market Association (LBMA) will consult with regulators and potential future administrators. The FCA has become increasingly involved in how practices of pricing of these metals are conducted, and the British regulator is currently visiting firms related to the London gold fixing.
“The LBMA has launched a consultation in order to ensure the best way forward for a London silver daily price mechanism,” said Ruth Crowell, the LBMA chief executive, in a statement. The statement continued to say “the LBMA will work with market participants, regulators and potential administrators to ensure the London silver market continues to serve efficiently the needs of market users around the world.”
The silver fixing takes place only once a day at noon by phone. The three banks will determine how much silver they want to buy and sell for clients and their own accounts. Traders will then relay shifts in the supply and demand, as well as take new orders as the price changes. The fixing dates back to 1897.
Deutsche Bank decided to pull out of both fixings in an attempt to scale back its commodities division.