(Kitco News) - Silver market participants want to see an electronic auction-based silver fix as the new benchmark, according to survey results released Friday from the London Bullion Market Association.
While organizations are still in the process of developing their price discovery systems, Kitco Metals Inc. recently launched a global silver fix price network. Kitco.com now publishes four fixing prices: 10 a.m. New York Silver Fix, 10 a.m. UK Silver Fix, the 10 a.m. Mumbai Silver Fix and the 10a.m. Hong Kong Silver Fix.
John Dourekas, senior vice president of Kitco Labs, a division of Kitco Metals, said they developed the four fixing prices because they represent the largest precious-metals trading centers in the world.
“Our new fixing network gives precious metal traders a geo-strategically balanced view of the global silver market,” he said.
Not only has Kitco created an enhanced network but it also meets the criteria that silver market participants are looking for according to the LBMA survey results, Dourekas said.
Dourekas said the Kitco fixing prices are derived from by a unique algorithm that averages the spot price between bid/offer on the wholesale silver market, as quoted by internationally recognized bullion dealers.
The algorithm uses minimum present data points, and the price quotes come from anywhere from 10 to 30 international bullion dealers, he added.
“Not only were we able to create a new method to determine the silver fixing, but we vigorously back-tested it against the current mechanism to validate the process,” he said.
The LBMA also said its survey showed participants are looking for a new silver fix to be tradeable and with an increased number of direct participants.
Companies have scrambled to create a new silver benchmark after the London Silver Market Fixing Ltd. Said earlier this year it would stop administering the London Silver Fixing as of Aug. 14. Although some analysts have said that the current price discovery mechanism is outdated, it is still widely used within the industry.
According to the LBMA survey, of the 440 participants, 64% use the price fixing on a daily basis and 24% use it periodically. When rating the London price fix for usefulness, survey participants gave it a rating of 7.5 out of 10.
While Kitco appears to be the first to publishing a new fixing price, they are not alone as a variety of different companies said they are in the process of creating a new pricing mechanism.
Last week, the CME Group and the London Metal Exchange said they were working with the LBMA to create a new fixing process. Since then, Thomson Reuters and Platts have said they are also in talks with the association.
On Wednesday, ETF Securities, which manages a variety of exchange-traded funds, said it is interested in creating a benchmark price.
Although several firms said they are interested in creating a new silver fix, the LBMA survey showed only 25% of respondents said they would consider acting as a contributor; 31% said they might consider it.
The LBMA is planning a seminar on June 20 to go over the results and get feedback from the association’s members.
Dourekas said because Kitco.com is the world’s top-rated precious metals information website, the company believes that its market presence and platform can create the new global silver benchmark.
“The production and publishing of these new silver fixes is in keeping with the pioneering tradition of data provision that makes Kitco the world's most-trusted source of important metals market information,” he said.
