STOCK MARKET WATCH -- Wednesday, 19 November 2014

[Demeter]

24. With gold benchmark fixed, OTC trade eyed as next reform milestone

PERHAPS, OUT OF ALL THIS GLOBAL REGULATION WILL COME THE EQUIVALENT OF A GLOBAL GLASS-STEAGAL? IF NOBODY SABOTAGES IT...WE WILL HAVE TO WAIT TO SEE

http://uk.reuters.com/article/2014/11/09/gold-lbma-otc-idUKL6N0SC49J20141109

Calling time on London's century-old gold "fix" could mark the beginning of an even wider industry overhaul that may ultimately dilute the dominance of the highly profitable bilateral over-the-counter trading. London's bullion price benchmarks, or fixes, were transformed in a matter of months this year as regulatory scrutiny and accusations of market manipulation made price-setting among a handful of banks untenable. The overhaul spawned electronic price setting platforms for gold, silver, platinum and palladium, with gold's fate sealed just last week when Intercontinental Exchange were announced as administrators for the prized bullion benchmark in early 2015.

So, no more telephone calls between four banks twice a day, but an automated and audited process that should guarantee that customers, including producers, refiners and central banks, continue to have a reference price that values their holdings. The changes were brought in to reduce any risk of price manipulation, such as that found in lending rates between banks with the LIBOR scandal in 2012.

More than $5 trillion worth of gold transactions are made over the counter in London every year. The OTC market, where trades are executed via dealer networks as opposed to a centralized exchange, exceeds the trading of gold futures. But as regulators investigate the transparency of global financial markets and banks recoil from investigations, sources say the industry is now open to more drastic reforms.

"No-one would have believed a year ago that within 2014 the market would have changed so completely ... you can now imagine the market also contemplating certain changes they would have never previously looked at," Jonathan Spall, managing director of GCubed Metals, said.

"The market could go to a cleared model on exchanges, for example," he added.