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LBMA selects new administrator for the Gold Fix

ICE Benchmark Administration (IBA) has been appointed as the new administrator of the London Bullion Market Association (LBMA) Gold Price. IBA will assume this responsibility in early 2015.

IBA, which is an independent specialist in benchmarking, will serve as a third-party administrator for the LBMA Gold Price, providing price platform information to producers and consumers, administrative services and governance, LBMA noted in a statement.

Ruth Crowell, Chief Executive of the LBMA commented: “I’m delighted to announce an administrator in time to allow the market to move forward from consultation into timely implementation. The LBMA is grateful for all the support, comments and feedback it has received from all market participants. While we know that it is subject to internal compliance approvals, we are pleased to have eleven entities intending to be Phase One Participants.”

The LBMA Gold Price will replace the Gold Fixing Price which has been in existence since September 1919. The price is set in London twice a day and provides a published benchmark price for gold that is widely used as an international pricing medium by producers, consumers, investors and central banks. The gold fix came under scrutiny as part of a wider examination of financial benchmarks in the wake of a global scandal involving the rigging of interest rates. The price of gold had historically been set daily in London by way of conference calls between four banks. In May this year, Barclays PLC was fined GBP26 million ($43.5 million) by the U.K.’s Financial Conduct Authority for lax controls after one of its traders manipulated the gold fix at the expense of a client.

As the new administrator for the LBMA Gold Price, IBA will transition to a physically settled, electronic and tradable auction, with the ability to participate in three currencies: USD, EUR and GBP. Aggregated gold bids and offers will be published in real-time with the imbalance calculated and the price updated every 30 seconds. IBA will use the WebICE technology platform which will allow direct participants as well as sponsored clients to manage their own orders in the auction in real time via their own screens.

IBA will assume overall responsibilities for the London Gold Price as follows:

  • Governance of all LBMA Gold Price administrative processes including oversight, surveillance and decisions of methodology, systems and controls;
  • An electronic physically settled auction with live interest shown and orders taking in three currencies;
  • Established tools (WebICE) for participants to manage their risk in the process – for Front Office, Compliance and Credit Risk;
  • A fair and sustainable fee structure, designed to encourage direct participation from a diverse cross-section of market participants and broad use of the price as a benchmark.

Finbarr Hutcheson, President, ICE Benchmark Administration said: “We are delighted to have been selected by a combination of the LBMA and their members as the new administrator of the LBMA Gold Price. We look forward to working closely with the LBMA and the precious metals industry as we deliver an IOSCO-compliant benchmark that fulfils the requirements of market participants in an efficient and transparent manner.”

In July 2013 the IBA was appointed as the new administrator of LIBOR following a rigorous selection process sponsored by HM Treasury (UK) and Chaired by Baroness Hogg (Hogg Tendering Advisory Committee for LIBOR). IBA completed the LIBOR transition in February 2014 and in addition, became the new administrator for ISDAFIX in August 2014.

The LBMA statement is here.

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