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* Deutsche negotiating sale of fixing seat since January
* U.S. investors, traders have filed 17 suits against fixers
* Increased scrutiny could complicate fixing process
By Clara Denina and Jan Harvey
LONDON, April 25 (Reuters) - Deutsche Bank may end upresigning its seat on the London gold fix rather than selling itas U.S. lawsuits alleging price rigging against the five banksthat set the benchmark deter potential buyers, industry sourcessaid.
Over the past two months, U.S.-based investors and tradershave filed nearly 20 separate antitrust claims accusing Barclays, Deutsche Bank, HSBC, Bank of NovaScotia and Societe Generale of colluding tomanipulate the gold price.
At the time the initial suits were filed, Societe Generalecalled the claims "unsubstantiated", and Deutsche Bank describedthem as "without merit".
Barclays and HSBC have repeatedly declined to comment, whileBank of Nova Scotia has not responded to requests by Reuters forcomment.
The court cases are complicating negotiations that DeutscheBank had started with potential buyers after it announced inJanuary it was putting its seat at the fix up for sale, a sourcewith knowledge of the matter said.
"Which institution would want to buy the Deutsche seatknowing about all these lawsuits for manipulation?" the sourcesaid.
"Nobody will buy it until the cases are resolved, as thesemay mean inheriting a reputational risk that in the currentregulatory environment, frankly, nobody wants."
The gold fix, a benchmark widely used across the industry,is set twice a day by the five banks, which get together overthe telephone to work out a standard price for the metal basedon transactions between their clients.
Industry sources said only a handful of candidates hademerged to buy Deutsche's seat, mostly Asian banks looking toraise their profile in the London market.
South Africa's Standard Bank, in conjunction withChina's ICBC, at one stage was indicated as being inprime position to buy the seat, but its interest seems to havegone cold, a second source said.
"It doesn't look like that is going to result in anythingconcrete."
Deutsche Bank and Standard Bank declined to comment for thisstory.
CLEAN SLATE
It is unlikely that any residual liability would be passedon to a buyer, because the banks are named individually in theU.S. cases, but any potential bidder still will want to startwith a clean slate, the sources said.
"It seems unlikely that an independent, arm's-length buyerof a seat on this market would inherit the liabilities of aprevious holder, although this would depend not only on marketrules but also on the law applicable to any claims made," RobertFinney, a partner at law firm Holman Fenwick Willan, said.
Increased regulatory scrutiny, on the other hand, is "goingto be significantly disruptive to the London fix process", saidReynolds Porter Chamberlain's head of financial disputes, TomHibbert.
The gold fix, along with other commodity benchmarks, hascome under growing scrutiny by regulators including Germany'sBafin, Britain's Financial Conduct Authority and the U.S.Commodity Futures Trading Commission since the Libormanipulation case last year.
The pressure stemming from expected regulatory changes hasalso raised questions on whether other banks currently sittingat the gold fixing table may decide to resign.
Barclays on Tuesday said it would keep its gold-tradingbusiness while hiving off most of its global commoditiesoperations and that its gold fixing activity "was business asusual for now".
JULY DEADLINE
After the Libor (London Interbank Offered Rate) scandal, theInternational Organisation of Securities Commissions - a globalumbrella group for market regulators - detailed a series ofprinciples with which any institution providing a financialbenchmark should comply. It set a deadline of July 2014.
The Gold Fixing Company, which represents banks involved inprice settlement, is undertaking a review to ensure the gold fixcomplies with those benchmark principles.
"(For Libor and foreign-exchange litigation) people wouldquite like to wait and see what the regulators find, becausethey obviously will have got a very large amount of documentarymaterial and will make reference to it in their decisionnotices," Hibbert said.
"That's obviously missing here, because the regulators havenot issued a formal investigation in relation to the gold price,although there is a lot of noise about it," he added.
If no buyer is found, fixing could potentially continue withfour members. Deutsche is also resigning from silver fixing,leaving only Bank of Nova Scotia and HSBC involved in thatprocess.
The sources suggested a deadline either for a deal or forDeutsche Bank to resign would come within months.
"From a risk-management point of view, if Deutsche Bankwants to get out of the business, it may just retire, and thenthe Gold Fixing Company will have to figure out how to fill thespot," said Axel Merk, president and chief investment officer ofCalifornia-based Merk Funds. (Additional reporting by Frank Tang in New York; Editing byVeronica Brown and Dale Hudson)
