Is the LBMA Silver Price more transparent than the Fix? Not yet!

The new LBMA Silver Price benchmark setting has commenced to replace the old London Silver Fixing, but it doesn’t seem to be any more open and transparent than the old system.

So now we have had three days of the new LBMA Silver Price – the new name for the London Silver Fixing given that the term ‘Fix’ is somewhat discredited in modern-day parlance.  The banks involved in the old system, which had fallen to two, wanted to withdraw from it, in part because they felt the process, even if it was a totally honest system, which it probably was, could lay them open to having to defend expensive, and probably spurious, lawsuits and the London Bullion Market Association took upon itself to go out and set up some kind of new silver benchmarking process at very short notice. 

And is this new process any more transparent than the old one – one of the main charges laid against the old Silver fixing process.  The answer so far is probably not!  

Although one assumes it could become more open as the markets get to understand how it operates its new rather obscure process dealing in lakhs of silver rather than ounces, and in converting it back to a per ounce price.  (A lakh is a South Asian term for 100,000 units – in this case ounces.)  Why on earth such a measure was chosen defeats us – it just seems to be another way to obfuscate what should be a relatively straightforward process.

Mark O’Byrne’s Goldcore website out of Ireland has come up with a withering look by Ronan Manley at the new process which is well worth a read by anyone trying to get to grips with what the LBMA Silver Price is all about – click Silver price setting not transparent to read it.

Manley concludes by saying “The entire process has been a bit of a shambles. The Gold Anti Trust Action Committee (GATA) and those concerned about price manipulation will allege that the LBMA and the western bullion banks are engaged in a rebranding and repackaging exercise in order to maintain a cosy gold and silver cartel of bullion banks and ultimately control over precious metal prices.  If the CME/Reuters aren’t willing to share with the public the presentation that they made at a closed door seminar, especially since they won the competition and are now running the process, what hope is there for transparency in this new process?”

Manley obviously feels that a secretive selection process for the eventual winners of the group conducting the new silver pricing benchmark (Thomson Reuters/CME), coupled with a seemingly obscure process which few seem yet to fully understand, can be no more transparent than the old system – indeed some might argue less so.

Manley extensively quotes Ross Norman, the head of Sharps Pixley, who has had long experience in viewing the machinations of the London precious metals scene whether obscure, or open and a supporter of the old system.  Norman’s views we published in these pages on Wednesday last week – see: Confused by the new London silver fix? You should be! when the initial details of the new electronic process were revealed.

To an extent the reform of the London Silver Fixing is less important for global precious metals markets than the twice daily settings of the gold pricing benchmark – the London Gold Fix – where there is also pressure for reform and why, perhaps there was an indecently hasty rush to try to get in on the revised silver pricing system.  Those who jumped in here may feel that they’ll get the first shot also at revising the gold benchmark should the external pressures, not to mention the perhaps spurious lawsuits, cause that process to be completely reformed too.  That is a much bigger deal altogether.  One hopes rather more time will be taken to set up a system here that is open and transparent should a change be felt necessary to be made.

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