Polymetal intending to look for London Fixing replacement
MOSCOW. May 19 (Interfax) - Polymetal , Russia's largest silver producer and a major gold producer, intends to look for a replacement for London Fixing, a Polymetal representative told Interfax.
London Silver Market Fixing, which operates the silver benchmarking process called the London silver fix, has said it would stop the practice on August 14. The London silver fix has long been an indicator for setting the price of precious metals around the world. The figure is used for closing deals and drawing up contracts, including those among Russian subsoil users.
"Pricing our contracts for silver sales (both in bullions and in concentrate) is based on fixing quotes published by the London Bullion Market Association. There is a section in the contracts, however, according to which the parties much reach an agreement on an appropriate replacement for quotes if silver fixing ceases to exist or stops being representative. It is not yet clear what will replace fixing. This is the subject for consultations throughout all the industry. At our end, we are intending to take active participation in them," the Polymetal representative said.
The Association of Russian Banks' precious metals committee will examine the issue of conducting gold and silver fixing on the Moscow Exchange, the committee's chairman, Gazprombank Vice President Yury Cherny, told Interfax.
Because there is currently no alternative to silver fixing on the London exchange, establishing fixing in Moscow would allow Russian companies to avoid additional risks when selling and hedging precious metals, Cherny said.
Spot trading in gold and silver has been conducted on the Moscow Exchange since last fall. "The exchange could assume the function of setting the benchmark price, along the same lines as London fixing or in some other form. This question will be discussed and coordinated with market participants and the regulator [the Central Bank of Russia]," the director of Moscow Exchange's commodities market Mikhail Orlenko told Interfax.
At present, the exchange does not possess the infrastructure needed for fixing. But bankers are ready to initiate the legislative changes and draft the necessary regulations. The price would be set in rubles per gram, in contrast to the practice in London, which uses dollars per ounce.