LBMA Silver to be PRICED IN Russian Rubles and Chinese Yuan

ON SEPTEMBER 25th, 2017, London silver will be priced in RUBLES, ONSHORE AND OFFSHORE YUAN, Rupees, and other currencies as sweeping changes are beginning now. Here’s the details so far…

There are two parts to take into consideration on these sweeping changes.

First, there was a request for feedback on their proposed changes to the LBMA. Secondly, NOBODY made ANY feedback, and so the proposal will launch as stated on September 25th, 2017.

First there was a proposal:

Highlights from the Plan of Administration (link is to entire document) from new ICE Benchmark

This means that IBA proposes to make some changes to the process of setting the benchmark, in


 removing the Seller’s Premium

Currently, silver auction participants settle trades arising from the auction at a premium of USD 0.5 cents per ounce which is added to the benchmark price so that all trades settle at a higher price than the published benchmark. Participants settle amongst themselves at the auction price plus the Seller’s Premium without any additional spread. Participants settle with their clients at a spread around the benchmark price plus the Seller’s Premium. Participants each set a spread at which they will buy from clients and sell to clients. The spreads are agreed bilaterally between Participants and each of their clients. The supply chain for physical silver is linked together by a series of principal-to-principal transactions starting from miner to refiner before moving onto the banks that intermediate between producers and consumers. The actual USD per ounce value of many of the transactions between these market segments is linked to the London Silver Price. Firms in the market will typically buy and sell using this same reference price and will therefore tend to add a commission when selling in order to account for their value added.

 having a generic code of conduct and generic auction rules based on those currently applying
to the LBMA Gold Price

IBA currently publishes the “Code of Conduct for the IBA Gold Auction and the LBMA Gold Price Benchmark”. This represents the Practice Standards required under the FCA’s rules. IBA proposes to adapt the code to become the “Code of Conduct for the IBA Precious Metals Auctions and the LBMA Gold and Silver Price Benchmarks” as shown in Appendix 2. IBA also has auction rules for Participants and these will be similarly adapted to become the Precious Metals Auction Rule Book.

 hosting the auction on WebICE

IBA’s auction process is hosted on WebICE which will provide a facility for trading physical spot Silver at an equilibrium between buying and selling interests, subject to the Imbalance Threshold. This final price from the auction will be published to the market as the LBMA Silver Price benchmark. There will continue to be one Silver auction each day, at 12:00 London time.

 setting auction parameters specifically for the LBMA Silver Price, including an adjustment to
the Imbalance Threshold1

Pre-Auction Round Duration CURRENT 120 seconds (2 minutes) IBA 900 seconds (30 minutes)

 increasing the number of LBMA Silver Price currencies

The LBMA Silver Price is currently published in USD, EUR and GBP. The USD prices are published to 3 decimal places and the EUR and GBP prices are published to 4 decimal places. The price discovery in IBA’s Gold auction is in USD. At the end of the auction, the price for Gold in USD is converted into other currencies. These non-USD prices are published as indicative settlement prices at the end of the auction, or as benchmarks for reference in derivative contracts. The additional currencies in the LBMA Gold Price are Australian Dollars, British Pounds, Canadian Dollars, Euros, Onshore and Offshore Yuan, Indian Rupees, Japanese Yen, Malaysian Ringgit, Russian Rubles, Singapore Dollars, South African Rand, Swiss Francs, New Taiwan Dollars, Thai Baht and Turkish Lira. The LBMA Gold Price is available both in prices per ounce and in prices per gram. IBA intends to publish the LBMA Silver Price in the same currencies and in prices per ounce and prices per gram.

 publishing the non-USD prices to 2 decimal places (from 4 decimal places for EUR and GBP
at present)

 introducing central clearing.

In April 2017, IBA introduced central clearing to the Gold auction to enable a wider range of participants to join the auction. Firms may elect their preferences for cleared or bilateral matching in the auction. Since the introduction, over 5 million oz. of gold have cleared through ICE, the equivalent of USD 6.25 billion. Volume that is cleared has increased from 30% at launch to 67% for the week ending 28 July 2017.

Since the initial consultation and request for feedback, we now have this:


ICE Benchmark Administration Limited (IBA) published a paper on 3 August setting proposals for IBA’s administration of the LBMA Silver Price to ensure strong governance and evolution of this important benchmark:

 removing the Seller’s Premium

 having a generic code of conduct and generic auction rules based on those currently applying to the LBMA Gold Price

 hosting the auction on WebICE

 setting auction parameters specifically for the LBMA Silver Price, including an adjustment to the Imbalance Threshold

 increasing the number of LBMA Silver Price currencies

 publishing the non-USD prices to 2 decimal places (from 4 decimal places for EUR and GBP at present), and

 introducing central clearing.

IBA received no consultation responses and accordingly is preparing to implement the proposals as stated.

IBA will begin administering the LBMA Silver Price benchmark and operating the underlying Auction from 25 September 2017, subject to regulatory approval.

Here is what they say about themselves on their website:

Access to accurate, reliable information is essential to the integrity and everyday functioning of the world’s markets and the business communities they support. Trusted benchmark data across all asset classes, from interest rates to commodities, is key to making informed decisions that have a global impact. It’s how loans and mortgages are calculated and the way jewelers and gold refiners determine the price of gold for their buyers.

As the world’s most experienced administrator of regulated benchmarks, we’re leading benchmark reform and transitioning benchmarks to a new era where high standards and integrity help market participants make better decisions. Today we’re responsible for building and protecting important world benchmarks.

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