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* ICE Benchmark Administrator to replace gold fix on March20
* Four chairs to rotate during first 6 months - source (Updates with exact number of participants, comments)
By Clara Denina
LONDON, March 19 (Reuters) - Six institutions will startsetting gold prices electronically on Friday, asIntercontinental Exchange completes a sweeping change toLondon's bullion benchmarks and dispenses with the century-oldgold "fix".
Since 1919, representatives from four or five banks haveagreed a twice-daily price on which their customers - producers,consumers and investors - could trade and value gold.
Sweeping reform triggered by a regulatory push for moretransparency after the Libor interest rate-rigging scandal brokein 2012, saw banks stop acting as both data providers and marketmakers.
As financial institutions even considered pulling out of thefixing process, three different exchanges took on the challengeof setting the separate precious metals benchmarks.
ICE Benchmark Administration (IBA), a subsidiary of ICE, was chosen to provide a physically settled, electronicand tradeable auction for what will become the LBMA (LondonBullion Market Association) Gold Price.
Friday's move to electronic auctions should repair outsideperceptions of London's role in the market, damaged by the oneknown case of abuse at Barclays, Adrian Ash, head of research atonline dealer BullionVault.com, said.
In May last year, the Financial Conduct Authority (FCA)fined Barclays 26 million pounds ($43.8 million) for failures ininternal controls that allowed a trader to manipulate thesetting of gold prices. Other "fixing" banks came under thescrutiny of regulators.
"Can we guarantee there is never going to be manipulation?No. But the surveillance is strong with (an) audit trail andregulation is strong," Finbarr Hutcheson, President of ICEBenchmark Administration Ltd, said.
Six institutions will still submit orders during theprocess, as they currently do.
The four current providers of the gold "fix", Barclays, HSBC, Bank of Nova Scotia andSociete Generale will be among them, Hutcheson said,without disclosing the names of the two new ones.
The issue around participation has gained importance due tothe current regulatory environment, which aims to promotetransparency and inclusion during the setting of financialbenchmarks used by customers around the world.
"Not everybody realises the level of commitment thatparticipating in a benchmark requires, that's why the list (ofparticipants) you have today is shorter than envisaged," abullion banking source added.
The LBMA, which will retain intellectual property of the newbenchmark, had said 11 entities intended to participate in thenew mechanism from the start and Chinese banks were interested.
But Industrial and Commercial Bank of China, Bank of ChinaInternational and China Construction Bank, which are ordinarymembers of the LBMA, will not be joining the new process,Hutcheson said.
When Chicago Mercantile Exchange, jointly withThomson Reuters, took over the administration of thesilver benchmark in August, just three entities were able tojoin the electronic auction from day one. There are now sixparticipants.
The London Metal Exchange, part of the Hong Kong Exchange has been running the platinum and palladium fixes fromDecember, with four participants.
ICE said it has appointed an independent chairperson whowill oversee the process, although it will look to develop analgorithm at a later stage.
Four ex-bankers have been appointed as chairs and willrotate in their duty in the initial six months, one source said. (Editing by Veronica Brown and David Evans)
