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New “London Silver Price” Launching In Just Two Days - Confusion Reigns

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New “London Silver Price” Launching In Just Two Days - Confusion Reigns

Uncertainty and confusion reigns in London just two days prior to the launch of the new silver fix - the renamed “London Silver Prices”.

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The Financial Times reported overnight on the uncertainty regarding the 117 year old silver price fix:

Build it and they will come. Or that is what participants in London’s $1.6 trillion a year silver market will be hoping. There are just three trading days before the new, electronic replacement for the 117-year old silver fix goes live and there is still considerable uncertainty over who will be participating on Friday.

Since there is no centralised clearing for precious metals markets, the initial users of the new benchmark are expected to be the 11 market-making members of the London Bullion Market Association, which include Credit Suisse, JPMorgan, Goldman Sachs and UBS.

But so far no one has publicly stepped forward to say they will be involved even though testing of the system has gone without a hitch. The CME Group, whose Comex exchange offers the biggest silver futures contract, is providing the electronic price platform and the algorithm that will be used to set the auction’s opening price. Thomson Reuters will take care of the governance and administration.”

Interestingly, the FT also reports that there may be significant buying of silver in the coming days:

Indeed, there are already rumours in the market place that some big silver producers and consumers are preparing to pepper the market with orders.”

This creates the possibility of the short squeeze that many market participants and silver analysts have been expecting for some time.

The FT says that the uncertainty is “only to be expected” and the list of participants may simply be released Friday.

However, the uncertainty is creating concern in the silver market amongst many participants who rely on the fix. There is a huge lack of transparency and little information about the pricing mechanism has been provided.

All that is clear is that the 117 year old silver fix is being replaced by a new “London Silver Price” with the handy acronym LSP.

The LSP is due to be administered on behalf of the LBMA by the CME Group and Thomson Reuters.

There is uncertainty as to whether the new price will be made publicly available through data providers, brokers etc.

Here is what the Bullion Desk had to say about the confusing situation:

The terms of the agreement state that the LSP should be equally available live for participating vendors With two days to go, it is far from clear that we – or other vendors – will be able to source the LSP and distribute it to our subscribers and data feed customers.

What we do know is that the LSP will be discovered through an electronic auction process. There will be no chairman; instead, the system algorithm will move the auction price up and down until buy and sell orders are matched to within a reasonable tolerance of 300,000 ounces.

There will be a wider number of participants than the old fix, although we do not who they will be.

In addition to the actual LSP price, it will theoretically be possible to follow the live auction process, observing net supply and demand at the various trial prices. Access to the LSP will initially be free but after an introductory period of six months a fee must be paid.

There are many questions then that still need answering, not least what the auction data will look like and what it will cost to follow the LSP process live or observe the price live. FastMarkets will continue to do everything possible to secure this important silver benchmark for our customers.


Silver in Dollars - 5 Year (Thomson Reuters)

Dan Rees, head of strategy for commodities at Thomson Reuters, said last month that in order to facilitate a smooth transition, there would be no major alterations to the current set up for a period of six months. After that point a fee to access the new silver price is likely to be instated.

The old silver fix ended in April, after Deutsche Bank withdrew from the process after the German financial regulator announced an investigation into the gold and silver fixes. This left only two banks on the fixing panel — Bank of Nova Scotia and HSBC Holdings who also under regulatory pressure may have decided to discontinue the fix.

The LBMA led search for an alternative came as market regulators had been scrutinizing benchmarks across the financial sector in the wake of a scandal involving rigging of interest rates, foreign exchange and other markets.

We have concerns about both the new silver fix and the looming new gold fix.

From our point of view, the replacement of a handful of banks with CME and Thomson Reuters was a positive development. However, the devil is in the detail and it is important that the new price discovery mechanism is transparent and that there is regulatory oversight.

CME are the U.S.' largest and the world's second largest futures and options exchange and we would have a concern that the new fixes are derived solely from futures trading and electronic trading rather than from actual supply and demand in the physical market.

Our concerns are due to the abuses that have been seen with regard to rogue traders, 'dark pools' and high speed computer trading. The CME themselves have acknowledged that markets are manipulated via high speed computer programs. Market participants need reassurance that such manipulation will not affect the new London Silver Price.

We believe that the recent rigging of the gold price, as seen in the FCA's findings against Barclays, means that there should be financial regulation and oversight of the new fixing process by regulatory authorities.

Silver's very attractive fundamentals and the new silver fix coming this Friday were discussed in our recent interview here:

Silver Manipulation To End; $150 Per Ounce Possible - Video

 

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Thu, 08/14/2014 - 06:37 | 5091290 Kina
Kina's picture

Don't worry the price fixing will be as corrupt as it ever was. Corruption through the entire system is systemic.

Thu, 08/14/2014 - 02:35 | 5091026 jack stephan
jack stephan's picture

I been doing this a few years. If
I told anyone how........ Well that is another story, follow numbers .

I'm going to forget the fact the horse year genuinely sucks giant balls. And do a shout out anyhow.

http://www.youtube.com/watch?v=5EqWN4fT79s&sns=em

Suck if
Well nicer ok good night

Wed, 08/13/2014 - 18:13 | 5089433 directaction
directaction's picture

The historical price chart above says it's "5 year" but it's really "6 year." 

Wed, 08/13/2014 - 21:47 | 5090350 espirit
espirit's picture

I just knew Al go re was neck deep in this.

Wed, 08/13/2014 - 17:32 | 5089249 spinone
spinone's picture

keep stacking

 

Wed, 08/13/2014 - 21:49 | 5090356 espirit
espirit's picture

Oopsie.

SOP in Peru.

Wed, 08/13/2014 - 16:11 | 5088814 Rigger
Rigger's picture

So, the new 'fix' algo works by matching the amount of contracts sold vs bought... So, if I were intent on suppressing pice all I would have to do is dump an assload of contracta around the time of the fix... But of course, we wont see that, will we?

 

/obvious sarc

,

Wed, 08/13/2014 - 18:54 | 5089626 TVP
TVP's picture

Thing about money printing is just that - it not only debases the currency, but also allows the money printers infinite power to place buy/sell orders in the currency of their choice, in whatever market they damn well please.  Just print it up, and place the orders.  Done.  

Of course, suppressing the price of PMs remains crucial to sustaining confidence in fiat.  So it doesn't take a financial wiz to figure this one out.  

Wed, 08/13/2014 - 15:32 | 5088611 Mercuryquicksilver
Mercuryquicksilver's picture

Thats what I need. A market to buy and sell huge quantities of invisible silver several months in the future. Seems legit to me.

Wed, 08/13/2014 - 15:23 | 5088558 B190769Sonny
B190769Sonny's picture

Where are the Hunt Brothers when you need them....?

Wed, 08/13/2014 - 15:17 | 5088524 Bemused Observer
Bemused Observer's picture

When I see people commenting on how maybe silver/gold will go up, all I can think is these folks have it all wrong. Who CARES what the "price" is?

Answer: Only those who want to trade it for dollars. Which, to me, is missing the whole POINT of buying PM's!

If you want more dollars (for whatever reason) there are plenty of things that are monetized that you can trade like baseball cards, if you want. But PM's are NOT to get more dollars, they are to protect you FROM dollars.

Wed, 08/13/2014 - 14:18 | 5088197 MrBoompi
MrBoompi's picture

Short squeeze?  Any time you see comments like this it's risk going long.  If they stop allowing naked shorting maybe that would be a good time to buy.  They even have the audacity to call it a "precious metal market"?  Since when is paper a precious metal? 

Wed, 08/13/2014 - 14:18 | 5088195 BandGap
BandGap's picture

My baby does the hanky panky.

Wed, 08/13/2014 - 14:39 | 5088136 Joebloinvestor
Joebloinvestor's picture

They ought to have a condition that the participants sign up and pledge to that any hanky panky and you go straight to jail and forfeit a BIG FUCKING AMOUNT.

I am sure they have people working overtime on SCAMS to game the new system that are just on the edge of ethical.

Wed, 08/13/2014 - 17:48 | 5088124 cristo
cristo's picture

"when you believe something is a problem that's not the problem then you'll accept a solution that's not the solution "

-DTS-

Wed, 08/13/2014 - 13:24 | 5087916 jharry
jharry's picture

My prediction is that nothing will change.  The price will still be controlled within parameters as designated by the interests in charge of the magic box.  

Wed, 08/13/2014 - 12:39 | 5087744 Joebloinvestor
Joebloinvestor's picture

Since they have such a limited # of participants, there should be no HFT.

The previous system used only 2 quotes a day.

However, collusion between members is not guaranteed with this new system either.

Wed, 08/13/2014 - 12:20 | 5087643 jmcadg
jmcadg's picture

'Reuters advise that prices are no longer in US dollars per ounce but US dollars per "lakh" or 100,000 ounces ... why ?'

Conspiratorially, as the price is massively suppressed. Might this help when the beach ball pops up, so to speak?

Edit: My bad I read that as 100,000ths of an ounce :( Back to the conspiracy board.

Wed, 08/13/2014 - 12:56 | 5087808 walküre
walküre's picture

Prime example why everyone will be confused. An ounce for a 20? How much longer is that possible?

Wed, 08/13/2014 - 12:04 | 5087560 monopoly
monopoly's picture

Zzzzzz, waiting with my silver. All at losses now. Not too optimistic as this rigged game moves on.

Wed, 08/13/2014 - 15:12 | 5088471 Bemused Observer
Bemused Observer's picture

Your silver is only a "loss" if you sell it at today's price. But why would you DO that, unless it was an emergency or something?

So stop comparing your physical silver with the fake prices being bandied about. Hopefully, you bought knowing it wasn't a typical buy low/sell high thing. PM's are INSURANCE, not an investment. Its value will become apparent should it be needed, just like your home insurance is an annoying 'cost', until the day your house burns down.

Wed, 08/13/2014 - 13:27 | 5087927 Save_America1st
Save_America1st's picture

keep stacking more phyzz at these lower fake paper prices...your imaginary $ "losses" in fiat price paid for your other phyzz will decrease while your real value in stacked phyzz will increase.  Win-Win

Remember...you haven't lost anything as long as you don't sell your phyzz for worthless paper $$$'s. 

Wed, 08/13/2014 - 11:50 | 5087484 Infinite QE
Infinite QE's picture

Why do the  terms `fixing' and `free markets' seem to be in opposition to me?

Wed, 08/13/2014 - 12:07 | 5087580 hidingfromhelis
hidingfromhelis's picture

^^Not a team player^^

If "they" were serious about price discovery, there's certainly enough technology and real-time data available to have the market set the price.  Having a "fix" is simply a way to carry forward an outdated form of manipulation into a present day form of manipulation under the guise of being more accurate.  It's still the same manipulation and opportunity to front run.

Wed, 08/13/2014 - 15:35 | 5088632 Infinite QE
Infinite QE's picture

Indeed. It's just in-your-face, f-off we control these markets stuff.

Wed, 08/13/2014 - 11:46 | 5087456 Lordflin
Lordflin's picture

Yes definitely we need a new regulatory agency for the silver market... that will 'fix' everything.

Wed, 08/13/2014 - 11:32 | 5087389 alexcojones
alexcojones's picture

LSP - Lies & Serious Propaganda

Wed, 08/13/2014 - 11:30 | 5087375 alexcojones
alexcojones's picture

Quote: "Uncertainty and confusion reigns in London"

King World News much?

I'm heading to the LCS, where they must not have gotten the news.

Wed, 08/13/2014 - 11:29 | 5087363 Gringo Viejo
Gringo Viejo's picture

Meet the new fix,...same as the old fix.

.......The Whom

Wed, 08/13/2014 - 11:27 | 5087353 jmcadg
jmcadg's picture

So a $5 triilion market in paper, a (lets be really generous) $2 billion phyysical market. Hmmm, do you see what I see ... 2500/1 paper claims to every 1 physical!

Wed, 08/13/2014 - 15:27 | 5088573 NidStyles
NidStyles's picture

shut up and BTFD. That is all you need to do.

Wed, 08/13/2014 - 19:25 | 5089785 BigJim
BigJim's picture

When it ends, it'll be spectacular.

Whether any of us will still be around to witness it is another matter.

Wed, 08/13/2014 - 11:25 | 5087331 Conax
Conax's picture

Oh look, "The LSP is due to be administered on behalf of the LBMA by the CME Group and Thomson Reuters."

The paragons of virtue will administer it as well.

Huzzah.

Wed, 08/13/2014 - 11:20 | 5087315 Conax
Conax's picture

The CME will provide an algorithm...

Huzzah.

Wed, 08/13/2014 - 11:14 | 5087294 the show
the show's picture

The sheeple finally catch on to Al Quida being CIA of the Middle East, so a simple name change to ISIS puts them off the scent.  Hey why not, Blackwater changing to XO did the same thing a few years back.  So it's the same playbook, goodbye Silver 'Fix', Hello LSP.  Just as Orwell foretold...

Wed, 08/13/2014 - 12:30 | 5087700 Bunghole
Bunghole's picture

Blackwater (Xo) is now Academi.

Sounds so intelligent, eh?

Wed, 08/13/2014 - 15:30 | 5088594 Mercuryquicksilver
Mercuryquicksilver's picture

The artist formerly known as Prince.

Wed, 08/13/2014 - 21:54 | 5090374 espirit
espirit's picture

Xe, not Xo.

Wed, 08/13/2014 - 11:20 | 5087312 MalteseFalcon
MalteseFalcon's picture

Move the 'market' out of England.

Wed, 08/13/2014 - 12:58 | 5087815 walküre
walküre's picture

Shanghai is taking over soon enough.

Wed, 08/13/2014 - 12:47 | 5087776 TahoeBilly2012
TahoeBilly2012's picture

City of London isn't England. England is just another slave ship.

Wed, 08/13/2014 - 11:04 | 5087242 SpanishGoop
SpanishGoop's picture

So silver price manipulation 2.0

 

 

Wed, 08/13/2014 - 11:44 | 5087453 Bossman1967
Bossman1967's picture

maybe they manipulate to the high you would hope. the banks that have all the silver should need the valuation to be higher

Wed, 08/13/2014 - 10:55 | 5087193 LostandFound
LostandFound's picture

Hmmm interesting times.....

Wed, 08/13/2014 - 10:51 | 5087178 jmcadg
jmcadg's picture

'we would have a concern that the new fixes are derived solely from futures trading and electronic trading rather than from actual supply and demand in the physical market.'

There you have it. Wouldn't that be refreshing.

Wed, 08/13/2014 - 10:26 | 5087040 Hobbleknee
Hobbleknee's picture

Meet the new boss.

Wed, 08/13/2014 - 11:14 | 5087293 LawsofPhysics
LawsofPhysics's picture

the "boss" is always the same, it's whether or not they can prevent true price discovery from occassional showing up.

 

same as it ever was.

Wed, 08/13/2014 - 12:03 | 5087552 El Oregonian
El Oregonian's picture

If they want to force it cheaper, hey, I'm game. I mean, why let the manipulators profit all by themselves.

"Let 'em attack, It just gives me more to stack!".

Wed, 08/13/2014 - 11:24 | 5087325 RockyRacoon
RockyRacoon's picture

Along with the new "standards" comes a new lexicon, a whole new vocabulary for the markets.

Sorta like a new dog and old tricks.

 

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