The argument for central clearing of London Bullion Market Association benchmarks has been gaining momentum, alongside calls for clearer guidance from the regulators on the exact do's and don'ts of those involved, sources said.
The LBMA owns the intellectual property of the London gold, silver, platinum and palladium prices.
The gold price is operated/administrated by IBA, the benchmark arm of IntercontinentalExchange, platinum and palladium by the London Metal Exchange and silver by a partnership between CME Group/Thomson Reuters.
There have been some hiccups with the LBMA Silver Price so far this year, which have caused many to question the electronic system's effectiveness.
The LBMA, which does not participate in daily operations, declined to comment on the matter.
Both CME and Thomson Reuters declined to comment on the matter of central clearing or increased participation, pending an investigation into last week's settlement issues.
"We are investigating the trading activity that took place during the Thursday January 28 auction. It would be inappropriate to provide any further comment at this stage," Thomson Reuters said.
On January 28 the benchmark settled 6% below spot.
"It's very simple. The system needs more members. Clients need to be able to trade through the banks that they already have credit lines with," said one fund manager.
He reiterated the view that more guidance needs to be given by the Financial Conduct Authority.
The FCA did not respond to requests for comment.
One senior banker said therein lies the real issue.
"You are not going to get the FCA to give that guidance. That's the problem," he said.
"The next best solution is centralized clearing. The market needs more participants and people who are prepared to arbitrage. It will happen but maybe not quick enough," said the banker.
One senior source said that, for any rules to change it would be the decision of the FCA-accredited administrator, in the case of the LBMA silver price, Thomson Reuters.
The source said increased participation would be helpful, but also questioned its possibility due to the lack of ability to clear transactions by other counterparties.
"Clearing the auctions is the only way to ensure that these [recent problems] don't continue to happen," one producer said.
Platinum and palladium operator the LME declined to comment.
However, Platts has previously reported that LME Clear is already set up and approved to clear precious metals. The exchange included precious in its requests for regulatory approvals when it set up the clearing house.
IBA was not immediately available for comment.
Not all were convinced of the effectiveness of central clearing as a solution.
"Central clearing is a complete red-herring as far as fixings are concerned. I cannot recall anyone ever having a problem with a fixing order because it wasn't centrally cleared," said one banking source.
He said that over-the-counter clearing in London is months, if not years, away.
"What needs to happen urgently is official participants have to be given clear regulatory guidance as to how, under IOSCO principles and whatever other strictures apply, they can accept legitimate changes to client orders during the auction process," he said.
