The London Metal Exchange will stop administering twice-daily auctions that set benchmark platinum and palladium prices from the middle of next year, as it focuses on its core base metals offering.
Results of the LBMA Platinum and Palladium Price auctions are used across the market and industry for settling contracts and transactions. The auction process itself also provides a window of increased liquidity that helps those trading in large volumes.
The LME began running the auctions in 2014, with the electronic procedure replacing a previous phone-based system. The overhaul — a similar revamp also took place in the gold and silver markets — came as scrutiny increased on how benchmarks are set.
The platinum and palladium auctions “no longer represent a core activity for us and, therefore, we believe it is in the best interests of the LME and the market to transition pricing to an alternative venue,” Jamie Turner, chief operating officer at the LME, said in a statement.
Details on a new administrator of the auctions will be announced in January, said Ruth Crowell, chief executive officer of the LBMA, which oversees London’s precious metals markets. Daily gold and silver auctions are currently run by ICE Benchmark Administration.
Six participants are currently able to directly take part in the platinum and palladium auctions, according to the LBMA’s website. They are BASF Metals Ltd., Goldman Sachs Group Inc., HSBC Holdings Plc, Johnson Matthey Plc, ICBC Standard Bank Plc and StoneX.
Last year, Goldman Sachs and HSBC units were among four companies that agreed to pay a combined $20 million to settle claims they manipulated prices in the platinum and palladium markets after a decade of litigation.
(By Jack Ryan)