After a year full of controversy about a number of London fix benchmarks, one of them will be gone for good after a new methodology for determining gold price daily rates will be launched in March 2015. The Intercontinental Exchange (NYSE:ICE), and the London Bullion Market Association (LBMA) will replace the old calculation method with the new LBMA Gold Price.
Back in November, the LBMA announced that ICE Benchmark Administration (IBA) will officially become the administrator of the new pricing mechanism.
The new methodology will involve an auction with bids allowing them the use of three different currencies, the U.S. dollar, the euro and the British pound. The LBMA Gold Price auction will be physically settled, electronic and tradable auction during which aggregated gold bids and offers will be updated in real-time with the imbalance calculated and the price updated every 30 seconds.
IBA will use ICE’s front-end, WebICE, as a platform to allow access to direct participants, as well as sponsored clients for order management.
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The President of the ICE Benchmark Administration, Finbarr Hutcheson, said: “Following the LBMA’s announcement in November we have been working closely with the precious metals industry to further enhance the benchmark. We are encouraged by the number of firms who have shown interest in being participants in the new, electronic auction.”
“Expanding the number of participants in the auction will increase the transparency and robustness of the data used to calculate the benchmark, giving a better representation of the market price,” he added.
The LBMA Gold Price will replace the Gold Fixing Price, which has been in place for almost 95 years. The benchmark will be regulated by the Financial Conduct Authority.
LBMA’s Chief Executive, Ruth Crowell, said, “I’m delighted to see a high level of interested participants for the March launch. The intention and the interest have been very positive and creates a more diverse pool of participants which includes Chinese banks. We look forward to having enhanced numbers of participants for day one for the LBMA Gold Price”.