The main benchmark for silver, the LBMA Silver Price, underwent changes in its methodology in August 2014 and became regulated in April 2015. In this Research Note, we assess the representativeness of the benchmark from March 2017 to September 2017.
Read the Research Note (PDF)[1]
Following cases of misconduct, the LBMA Silver Price underwent through process and regulatory changes aimed to improve the transparency and the robustness against manipulation of the benchmark.
But, after the interventions, market participants observed unusual differences between the LBMA Silver Price and the silver spot market prices. And they started questioning the representativeness of the LBMA Silver Price.
In this paper, we empirically assess the representativeness of the benchmark. Our analysis suggests that:
- the differences between the benchmark and the spot market prices, regardless whether they are due to temporary differences in volumes or to the benchmark setting algorithm, did not systematically compromise the representativeness of the LBMA Silver Price benchmark.
- However, because we only analysed data after the introduction of the electronic platform and the regulation of the benchmark, we cannot say whether representativeness deteriorated.
The analysis presented in this paper underlines the importance for regulatory authorities of using market and regulatory data for both making new policies and evaluating existing ones. It will also help increase transparency on benchmarks.