The Beginning Of The End Of Precious Metals Manipulation: The London Silver Fix Is Officially Dead
Following
a crackdown on precious metal manipulation by various European regulators
(mostly Germany's BaFin, recall "Precious
Metals Manipulation Worse Than Libor Scandal, German Regulator Says"), which
led to the shocking outcome that Deutsche Bank would pull out of the London gold
and silver fixing committees, the London Silver Market Fixing company ended up
with a most curious outcome: it would have just two members: HSBC and Bank of
Nova Scotia. And, as an
even more shocking result, overnight the London Silver Fix announced that after
August 14, 2014 it will no longer exist - the first of many victories
for all those who have fought for fair and unmanipulated precious metal
markets.
From
the press
release:
The
London Silver Market Fixing Limited (the 'Company') announces that it will cease to
administer the London Silver Fixing with effect from close of business on 14
August 2014. Until then, Deutsche Bank AG, HSBC Bank USA N.A. and The
Bank of Nova Scotia will remain members of the Company and the Company will
administer the London Silver Fixing and continue to liaise with the FCA and
other stakeholders.
The
period to 14 August 2014 will provide an opportunity for market-led adjustment
with consultation between clients and market participants.
The
London Bullion Market Association has expressed its willingness to assist with
discussions among market participants with a view to exploring whether the
market wishes to develop an alternative to the London Silver Fixing.
Q&A
1.
What will happen after 14 August 2014? Will the Silver Fixing cease to
exist?
With
effect from the close of business on 14 August 2014, the Company will cease to
administer a Silver Fixing, and a daily Silver Fixing Price will no longer be
published by the Company.
2.
What will happen in the period up to that date??
The
Company intends to continue to administer the daily Silver Fixing and publish
Silver Fixing Prices throughout that period.
3.
Why a three month notice period?
Although
members of the Company may resign on seven clear days' notice, the members have
confirmed that they stand ready to continue the Company's operations until (and
including) 14 August 2014.
4.
What happens after 14 August 2014 for market participants with contracts
referencing the Silver Fix?
The
Company is not in a position to comment on such matters, but market participants
can speak to their contractual counterparties.
5.
What does this mean for the gold, and platinum and palladium fixing
companies?
This
decision relates only to the London Silver Fixing administered by the Company.
The Company is not in a position to comment on other fixings
*
* *
This
huge loss for precious metal manipulators fixers was amusingly "explained" by
the FT's
John Dizard as follows: "The
field may be more level, but there are not enough players left for a game."
Mocking those who prefer unmanipulated markets, he said:
... once that satisfying self-righteous feeling passes, the dwellers on BaFin Island might want to consider whether they have helped create a level playing field without enough players for the game. So far, it would appear the significant beneficiaries of BaFin’s persuasion have been the less-than-systemically important dealers in international silver markets. While there will still be four participants in the London gold fix, the similarly structured 12pm London silver fix will now have only two participants, which common sense tells us means no real market at all.
Actually,
it will mean no manipulated market by a handful of participants. It will also
mean that going forward a much more transparent pricing mechanism will have to
be adopted: once which relies on, gasp, the entire market, not just legacy firms
that operated
for decades out of Rothschild's wood-panelled London basement.
Of
course, for Gizard, there is no manipulation:
Deutsche Bank will have withdrawn from participating in the ritual of setting a standard price for physical gold. While no wrongdoing by any of the gold-fixing participants has been proven legally, or even, I believe, convincingly demonstrated in econometric modelling,Deutsche apparently came under intense social pressure from its home regulator to withdraw.
Correct,
because banks withdraw from lucrative operations due to "social pressure", not
because they know full well some legal arm is about to crush an existing
arrangement with elements of criminality. While we are delighted that Mr. Gizard
will disagree, we are confident that after August 14 the price discovery model,
while certainly not free from manipulation, most certainly originating from
the BIS' Basel Offices, will be a far better one.
One
can only hope that in the future all vestiges of gold and silver manipulation
will eventually disappear resulting in what may be the first real price
discovery of precious metals, absent central and commercial bank
manipulation.
It
is the same FT that we go to for some additional color on today's stunning
outcome:
It was born in the late 19th century when a handful of London bullion dealers agreed to meet daily under a cloud of cigar smoke to set the price for the “devil’s metal”. But now, after 117 years of operation, the London silver fix – the global benchmark for the metal – is on its deathbed.The three banks that run the auction announced on Wednesday that silver prices would be “fixed” for the final time at noon on August 14. The move follows increased scrutiny by European and US regulators into precious metals price-setting following the Libor scandal and probe into possible forex market abuse.Deutsche Bank last month resigned its seats on the silver and gold fixes, after failing to find buyers. That left just two members on the silver fix, HSBC and Bank of Nova Scotia.Market participants said the benchmark process, which occurs via teleconference and allows miners, financial institutions and jewellers to trade silver and value their stocks and contracts, could not function properly with fewer than three members.The UK’s Financial Conduct Authority asked Deutsche Bank to stay on for an extra three months to allow for the benchmark to be wound down smoothly.“Deutsche Bank has postponed its resignation from the London Silver Market Fixing from 29 April 2014 to 14 August 2014, at which point the benchmark will terminate,” the bank said in a statement on Wednesday.
In
other words, the FCA - undoubtedly in conjunction with the Bank of England -
pushed hard to keep the existing manipulation structure in place for three
months, effectively against the will of the German regulator, and of Deutsche
Bank itself which wanted to get out as soon as possible.
As
for what happens after August 14, when the London Silver fix is officially gone,
we can't wait to find out.
In
the meantime, we are confident the existing members of the mirror fix, that of
gold, will be scurrying under rocks to avoid all public exposure. We plan to
spoil their plans later today when we profile just who they all
are.
Caption Contest: If Gold Is Broken, They "Fix" It
Much has
been written recently about the rigged London "gold fixing" process, during
which, as even Bloomberg
recently covered, the price of gold is blatantly manipulated. One thing was,
however, missing: a photo of the fixers in practice. Today, courtesy of German
WiWo, we show just what said "fixing" looks like in real life every single
day.
h/t @DrGideonGono
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