FOCUS – Door open to new entities to join silver fix – CME’s Hunnable

The LBMA would welcome more international participants in the silver price benchmarking process, CME Group precious metals managing director Harriet Hunnable told FastMarkets.

CME Group and partner Thomson Reuters jointly rolled out their new silver price benchmarking system on August 15 after winning the administration of the process in July.

“For international entities, some Chinese, who are already set up in the London spot market – the door is open for them to be a participating member in this pricing benchmark,” Hunnable said. “For all benchmarks, there needs to be confidence, transparency and more access – we were the only bidder on silver that understood that and made sure there were very low barriers for access.”

CME Group/Thomson Reuters also submitted a combined bid to the LBMA for the administration of the new gold price benchmarking mechanism, alongside seven other proposals. The LBMA hopes to make a decision next month, with the new system to be implemented later this year or early in 2015.

“Nobody else understood about price at that time; they may have learnt now but we certainly have learned more post deployment on silver and we want to bring those enhancements into gold,” Hunnable added.

“The scale for gold is much bigger. So is the fact that we have been through a transition and we know that the technology works. We have set rules and we know the code of conduct. This will make the transition for gold much easier. This is proven and is the only ready platform,” Hunnable said.

Several Chinese banks have indicated that they are considering joining the London Bullion Market Association’s gold and silver pricing benchmarks once the administration of the latter has been decided, the LBMA said last week.

“There is huge interest around the world in a benchmark as well as the fact that we have a market that wants to open up,” Hunnable said.

“The CME’s reach into Asia, Latin America and globally is huge,” she added. “Before silver we were engaged globally in Japan, China, Chile, they may well be talking their book [other bidders] but we’ve been doing it.”

There had been some concerns among market participants that the requirement for participants to hold LOCO London clearing accounts may prove an obstacle for new entrants but Hunnable explained that this has not been the case at all.

Not only is it possible for any entity from Hong Kong, China, Japan or Korea to hold an account but entities that have expressed interest already hold these accounts and have done for decades, she said.

“We’re bringing new members to the London bullion market,” Hunnable added. “Our team are getting enquiries from all parts of the world.”

JP Morgan joined the silver benchmarking process last week, alongside HSBC Bank USA, Mitsui & Co Precious Metals, the Bank of Nova Scotia – ScotiaMocatta and UBS AG.

(Editing by Mark Shaw)