Silver pricing goes electronic in London

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The 117 year old silver fix based in London has been replaced by an all electronic auctioning system intended to provide greater transparency and pricing efficiency of one of the most traded metals.

Silver, along with gold, has adopted a unique pricing structure over the past century in that all transactions have involved a single price, set in London once per day. However, recently the withdrawal of one of the troika of firms engaged in the price setting, or fix, meant that an alternative way to price the commodity was required.

The London Bullion Market Association, Thomson Reuters, and the CME group together developed a solution consisting of an electronic auction. This sets the price of Silver based on a series of auction rounds. Each round lasts 30 seconds, during which participants input their buy and sell volumes in lakhs, or 100,000 oz, or quarter lakhs. An algorithm seeks to match buy and sell orders within a permitted tolerance level of 3 lakhs. If there is no match then the auction price is changed and the auction restarts. The process continues until a balance within the equilibrium is found.



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