LME could reinstate silver contract after LBMA stops London Silver Fixing

The London Metal Exchange is considering reinstating its silver contract following news that the London Silver Market Fixing Ltd will no longer run the London Silver Fixing from August 14.

The London Metal Exchange is considering reinstating its silver contract following news that the London Silver Market Fixing Ltd will no longer run the London Silver Fixing from August 14.

The contract could be relaunched as part of a replacement process for the London Silver Fixing, Metal Bulletin understands.

“The LME is already a significant precious market player via both its data services venture with the LBMA and its precious metals clearing service, which will be supported by LME Clear from September,” a spokeswoman for the LME said.

“We are always looking at ways to expand our product offering, and are ready to expand our range of price discovery and post-trade tools to further service the precious metals market,” she added.

Traders were broadly supportive of the LME stepping in.

“There will be a need for somebody to step up to the plate. It could be an electronic fix, or fixed in the ring,” one trader said.

“The last time the LME launched a silver contract, it didn’t work, in part, because the banks involved would not report their entire silver bullion positions to satisfy reporting requirements around their comparatively minuscule LME positions, and something around that would need to be worked out,” he added.

The trading of silver both in the ring and on LMESelect would be a positive development, according to the md of a ring-dealing member.

“[We should] trade silver in the ring and on Select so as to ensure we have total transparency in order to establish a credible reference price,” he said.

“[If] we trade silver on Select only, then I would assume the LME would need to figure out an equitable closing price mechanism. [A Select mechanism] has been considered for base metals, and as yet, has not been acceptable to users,” he added.  

However, there would have to be a “good argument” to pick up the contract, according to a third market participant.

“[There would be] a far better chance of a new contract succeeding if they can grasp the opportunity of achieving a fix that is acceptable to the trade,” he said.

“The problem will be that so many who currently rely on the London Silver Fixing do not have access to the LME at this point – so there needs to be a big shift and commitment to open broker relationships,” he added.  

The London Bullion Market Association is running a consultation to determine “the best way forward for a London silver daily price mechanism”.

Claire Hack
Twitter: @clairehack_mb