For those of you familiar with trading gold, you will already be aware of the meetings held twice a day to fix the spot price, but it sometimes comes as a surprise to both traders and investors that the same “fixing” process takes place every day for spot silver prices, and is called the Daily Silver Fixing. The daily silver fixing began life in 1897, and has continued almost continuously ever since, and indeed formed the basis for the Gold Fix which was only formalised after the first World War in 1919. The first meetings were held at 1.45pm on weekdays, and 11.45am on Saturdays. The process has remained much the same since its inception, the only major change occurring in 1967, when the format was amended, with both the spot price, and the forward prices for the three, six, nine and twelve months agreed. Until recently the prices were agreed at a midday meeting by the members, but in 1999 the meeting was replaced with a phone conversation at 12 noon between the members of the committee. The following explains the process, and is reproduced by the kind permission of the London Silver Fixing, and unlike gold, the prices are presented in US dollars, UK Sterling and Euros.

At the start of each fixing, the Chairman announces an opening price to the other 2 members, who report that spot silver price back to their dealing rooms. They in turn relay this price to their customers, and based on orders received from them, instruct their representatives to declare themselves as buyers or sellers at that price. Provided there are both buyers and sellers at the price, members are then asked to state the number of ounces they wish to trade. If at the opening price there are only buyers or only sellers, or if the numbers of ounces to be bought or sold does not balance, the price is moved and the same procedure is followed until a balance is achieved. The Chairman then announces that the silver price is fixed. It should be noted that the Fix is said to balance if the buy amount and the sell amount are within 300,000 ounces of each other. The Silver Fixing will last as long as it is necessary to establish a price that satisfies both buyers and sellers.

Customers may leave orders in advance of the Fixings, alternatively, they may choose to be kept advised of price changes throughout the Fixing and may alter their orders accordingly at any time until the price is fixed. To ensure that any order change is communicated quickly to the Chairman, each representative has a verbal flag, which he raises immediately upon hearing of the change from his dealing room. As long as any flag is raised, the Chairman may not declare the price fixed.
Now before you run away with the idea that this fixes the price of silver for the rest of the day – think again!! This is NOT the case.  The fix price is the price at the exact instant in time at which it is agreed, but within seconds it will be trading at different prices around the world, so you may be wondering why it is fixed at all! The principle reason is that it allows traders and investors to have a benchmark against which to deal and trade, and for buyers and sellers to agree a rate for settlement of future trades and purchases all within a narrow spread. Clients place orders with the dealing rooms of fixing members, who net all orders before communicating their interest to their representative at the fixing.  The process provides anonymity for the clients, tight spreads, an international benchmark, and the advantages of a published price.