Any Silver Linings? The London Silver Fixing's Impact on Public Silver Markets Before and After the Introduction of Contemporaneous Futures Trading

Since 1897 the London Silver Fixing has conducted a daily auction which, to this day, sets the daily benchmark price for the precious metal. This private pricing club functions alongside active public markets for silver, including the physical spot and futures markets. This empirical market microstructure study analyses publicly traded silver instruments to assess the impact the fixing has on public markets. The study spans fourteen years of fixings, from January 2000 to December 2013, which includes the introduction of contemporaneous silver futures trading in late 2006. It finds statistically significantly lower prices around the time of the fixing in both spot and futures markets, elevated levels of trade volume and price volatility immediately following the fixing's start, well before the conclusion of the fixing and the publication of its outcome. Further, it finds statistically significant return advantages in the four minutes following the start of the fixing for informed traders while no significant returns follow the publication of the fixing outcome. Trades in the opening minutes of the fixing are highly predictive of the price direction of the fixings. The size and significance of these results increase after the introduction of contemporaneous futures trading