* ICE Benchmark Administrator to replace gold fix on March20
* Four chairs to rotate during first 6 months - source
By Clara Denina
LONDON, March 19 (Reuters) - A handful of banks will startsetting gold prices electronically on Friday, sources withdirect knowledge of the matter said, as IntercontinentalExchange completes a sweeping change to London's bullionbenchmarks and dispenses with the century-old gold "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 andrecord-keeping...should repair outside perceptions of London'srole in the market," said Adrian Ash, head of research at onlinedealer BullionVault.com.
Banks will still submit orders during the process, as theycurrently do.
"I would like to think (there will be) more than the current(four) ... but we'll have to wait and see," a source with directknowledge of the matter said.
Current providers of the gold "fix", Barclays, HSBC, Bank of Nova Scotia and Societe Generale, declined to comment on whether they will participate.
The issue around participation gained importance due to thecurrent 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 that 11 entities intended to participate inthe new mechanism from the start.
Industrial and Commercial Bank of China, Bank of ChinaInternational and China Construction Bank, which are ordinarymembers of the LBMA, were unlikely to be in the list of newparticipants at this stage, the first source 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 they willrotate in their duty during the initial six months, a fourthsource said. (Editing by Veronica Brown and David Evans)