CME Group Confirms Efforts to Formulate New Silver Fix

By Dow Jones Business News, 

By Francesca Freeman

CME Group Inc. Thursday confirmed its interest in filling the void left by the demise of the London silver fix.

"While the London market is looking at a new way to set the daily spot price of silver, we are working closely with the precious metals industry and the London Bullion Market Association to reduce market disruption by helping to find a robust transaction-based way to set the daily spot price so the markets can continue to work efficiently and seamlessly," said Harriet Hunnable, managing director of metals at CME Group.

The Wall Street Journal had previously reported that CME Group is in the early stages of discussion about establishing its own silver fix, which helps determine the value of some derivative contracts and affects the earnings of mining companies that sell raw material to metals refiners.

London Silver Market Fixing Ltd., which administers the process, announced the end of the benchmark earlier in May. It said it would now be left to "market participants" to come up with an alternative. The London Bullion Market Association is currently leading a market consultation into possible alternatives.

The fix has gone through various iterations in its 117-year history. Most recently, it has been set daily at noon by way of a conference call involving representatives from Deutsche Bank AG, HSBC Holdings PLC and Bank of Nova Scotia. But the benchmark was considered unviable, according to people familiar with the matter, after Deutsche Bank recently declared its intention to leave the process as part of a wider scaling back of its commodities business.

The silver fix and its counterpart the gold fix--which is set by four banks and has been around since 1919--have recently come under the spotlight from regulators as part of a broader examination of financial benchmarks in the wake of a global interest-rate-rigging scandal.

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This article appears in: Commodities

Referenced Stocks: BNS , CME , DB , HSBC

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