The century-old benchmark used by the $18 trillion global gold market is under scrutiny after one of its four member banks was fined for manipulating prices.

The U.K.’s Financial Conduct Authority said it fined Barclays Plc 26 million pounds ($44 million) because one of its traders sought to influence the price-setting process two years ago.

The bank alerted the regulator to the issue, a person with knowledge of the situation said. The London gold fixing, whose prices are used by mining companies, central banks and the U.S. Mint, was already under review by the FCA.

“I don’t think we would invent the gold fix mechanism as it is now, if it was just starting up,” Brian Lucey, a finance professor at Trinity College Dublin who has worked as an economist for the Central Bank of Ireland, said by phone. “That leads to the obvious question of do we then need it?”

Regulatory focus on financial benchmarks is intensifying after rigging was uncovered in everything from interbank lending rates to currencies. Economists and academics have said the gold fixing is susceptible to manipulation and lacks sufficient regulation, while traders say the process is efficient and a crucial reference point for the market.

Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays are the four remaining members of the fixing, after Deutsche Bank AG withdrew this month. A similar price-setting mechanism in the silver market will end in August after HSBC and Bank of Nova Scotia were left as the last two participants.

‘Fewer Participants’

“Barclays has undertaken a significant amount of work to enhance our systems and controls,” the bank said in a statement. “While there is much more to do to achieve the deep- rooted cultural change we embarked upon at the start of 2013, Barclays today has significantly changed for the better.”

Shani Halstead, a spokeswoman for HSBC in London, and Murray Parker, a spokesman at Societe Generale in London, declined to comment. Joe Konecny, a spokesman for Toronto-based Bank of Nova Scotia, didn’t reply to a voice message or e-mail.

“We may see fewer participants being involved in the fixing because of this,” Bernard Sin, the head of currency and metal trading at MKS (Switzerland) SA in Geneva, said today by phone. Sin has worked in precious metals for a quarter century.

The gold fixing takes place at 10:30 a.m. and 3 p.m. in London by phone, with the banks representing themselves and clients. The price is adjusted until the gold offered by either side is within 50 bars, or about 620 kilograms, at which point the fix is made.

Trader Fined

Traders relay the information to clients and take fresh orders as the price is adjusted during the fixing, according to the website of London Gold Market Fixing Ltd. Douglas Beadle, a consultant to the company, didn’t reply to a voicemail or e-mails seeking comment.

The FCA also fined former Barclays trader Daniel Plunkett 95,600 pounds and banned him from the industry. His actions allowed Barclays to avoid making a $3.9 million payment to a client, though the bank later compensated the customer in full, the FCA said.

Barclays entered into an option contract with the customer under which the client would only receive a payout if the gold fix that day exceeded $1,558.96, the FCA said. If the fixing was below that amount, Barclays wouldn’t have to pay anything.

On the evening of June 27, Plunkett e-mailed his colleagues saying he was hoping for a “mini puke to 1,558 for fixing.” The FCA said Plunkett meant a drop in the price before the fixing on June 28.

Precious Metals

Shortly after the fixing that day, the customer asked Barclays why it had settled below the barrier price, according to the FCA notice. Barclays started an internal probe and informed the regulator of the issue, according to a person with knowledge of the situation.

Barclays couldn’t provide contact details for Plunkett and he wasn’t listed in the local telephone directory. The bank and the trader agreed to settle at an early stage, qualifying for a 30 percent discount to their fines, the FCA said.

Separately, the regulator has been visiting member banks involved in the fixing this year as part of its review of gold benchmarks, a person with knowledge of the matter said last month.

Unusual trading patterns around the afternoon fixing in London are a sign of collusive behavior and should be investigated, Rosa Abrantes-Metz, a professor at New York University’s Stern School of Business, wrote in a draft research paper, which was reported by Bloomberg News in February.

Differing Views

Price fluctuations are a consequence of supply and demand, not manipulation, Ross Norman, the chief executive officer of London physical gold broker Sharps Pixley Ltd., said in March.

The volatility also reflects differing views on the value of metal rather than attempts to rig the price, said Norman, who has traded gold for 30 years and worked at Johnson Matthey Plc, N.M. Rothschild & Sons Ltd. and Credit Suisse Group AG. He reiterated those comments today.

“Because the fix takes part while the open market is still in operation, manipulation would be difficult,” James Moore, an analyst at FastMarkets Ltd. in London who previously dealt in fixings at Bank of Nova Scotia, said today by phone. “The fix is a globally recognized and very important benchmark.”

An alternative to fixings could be taking a price snapshot during the day when the market is most active, said Trinity College’s Lucey. The price could be set on a volume-weighted basis by taking an average and discarding the highest and lowest trades during a window, he said.

Market Snapshot

Taking a 10-minute snapshot of the London spot market but moving the timing each day without notice would help deter manipulation, said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany.

Alternatively, a benchmark could be provided by the London Metal Exchange if it added precious metals to its floor trading, Fertig said. That would allow for larger volumes and provide greater transparency and regulatory oversight, he said.

The gold fixing dates to 1919 when representatives from five dealers met at Rothschild’s office on St. Swithin’s Lane in London’s financial district. Rothschild pulled out in 2004.

There are at least 26 lawsuits related to the gold fixing in U.S. federal courts, 24 of them in front of Judge Valerie Caproni in New York. One is filed in New Jersey and one in California.

Germany’s Bafin is looking at benchmarking processes such as gold and silver price fixing at individual banks, Ben Fischer, a spokesman for the Bonn-based regulator, said in April. The U.S. Commodity Futures Trading Commission also discussed reviewing how gold prices are set in private meetings in 2013, a person with knowledge of the matter said in November.