ICE ‘clear favourite’ for gold fix in LBMA survey

Otmane El Rhazi from The Bullion Desk.

Intercontinental Exchange (ICE) was the clear favourite among LBMA participants to administrate the new gold price benchmarking process, according to consultation feedback at the LBMA conference in Lima seen by FastMarkets.

Bids from the LME and CME/Thomson Reuters were neck-and-neck for second place, with Electronic Broking Services (EBS), a wholesale electronic trading platform owned by ICAP, and Autilla/Sapient further down the field.

The survey showed that LBMA’s members clearly favoured the ICE’s ICE Benchmark Administration (IBA), an independent specialist benchmark administrator, primarily for its regulatory aspects. Its scores in technology, benchmark price mechanism, independence, documentation and regulation were comfortably ahead of its rivals.

While those LBMA members that participated in the phase-one selection process marked ICE highly in several fields, the CME/Thomson Reuters system scored consistently across the board but enjoyed no clear prominence in any of the categories on which members were asked to rank the platforms.

The LME outperformed the other systems on long-term costs and fared well on FX options but received the lowest ranking in independence.

Autilla’s system, in conjunction with Sapient, fared well across the board but fell short on feasibility of timing, documentation and FX options. And EBS was similarly well received but was perceived to be weaker in the fields of regulation, its benchmarking mechanism, short-term costs and, most prominently, the platform itself.

The twice-daily gold fix, which has been in operation since September 12, 1919, has come under increased regulatory and media scrutiny. While there have not been any findings of wrongdoing, a third-party operator is seen as a critical step in modernising the image of the benchmark process, while also providing enhanced transparency and compliance with legislation.

IBA will provide the price platform, methodology and overall administration and governance for the LBMA gold price. Its new mechanism is going through into a testing phase with the LBMA before going live some time in the first quarter of 2015.

Via IBA, ICE has administered LIBOR as of February this year and will handle ISDAFIX in future, which is already IOSCO-compliant. Some market participants stressed the importance of this in the eyes of both the LBMA and the UK’s Financial Conduct Authority (FCA), the UK regulator.

(Editing by Mark Shaw)

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