* Two tonnes of gold traded on first day of LMEprecious contract
* Regulatory push could shift OTC business onto exchange -GFMS
By Jan Harvey and Peter Hobson
LONDON, July 10 (Reuters) - More than two tonnes of gold were traded through the London Metal Exchange's new LMEprecious spot contract by late afternoon on its first day as the exchange began its bid to take a slice of the world's biggest over-the-counter (OTC) gold market.
The LMEprecious suite of gold and silver contracts was developed with a group of backers including banks Goldman Sachs and Morgan Stanley, which then set up EOS Precious Metals to promote trade in the contracts and benefit from a 50:50 revenue-sharing deal with the LME.
The LME launched its contracts at 0000 GMT on Monday, though volumes did not pick up until the start of the European trading day at 0700 GMT.
By 1609 GMT, 66,200 ounces (2.06 tonnes) of gold had traded on the LMEprecious spot contract, exchange data showed. That would be worth more than $80 million at current spot prices.
"Typical interbank trade between one party and another would be 5,000-10,000 ounces in a single trade," said Ross Norman, chief executive of bullion trader Sharps Pixley. "It will be nice to see what the trend is -- if (it picks up), you'd begin to think, here we go."
Market makers were quoting prices on monthly spreads out to June next year.
A source at one of the EOS partners said: "At this early stage players are finding their feet. It may be a while until people start trading in size."
As well as Goldman and Morgan Stanley, the EOS partnership includes banks ICBC Standard Societe Generale and Natixis, proprietory trader OSTC and the World Gold Council, an industry market development body.
All the banks except Natixis are general clearing members of LMEPrecious, along with brokers Marex Financial and BOCI Global Commodities (UK). OSTC, XTX Markets and Morgan Stanley's commodities unit are non-clearing members. Natixis is an individual clearing member.
U.S. exchanges CME Group and ICE have also launched London gold contracts this year, hoping to lure business from the traditional OTC market.
Both the LME, owned by Hong Kong Exchanges and Clearing , and ICE are in the running to take over as operators of the global silver benchmark, the LBMA Silver Price, when incumbents Thomson Reuters and CME Group step down.
On the gold front, meanwhile, CME Group's introduction of a spot spread contract in London this year and ICE's launch of a futures contract in January have led market participants to suggest that market liquidity could be fractured.
"We will be monitoring volumes and comparing with LBMA to see how LME impinges on OTC volume," Rhona O'Connell, head of research and forecasts at GFMS, told the Reuters Global Gold Forum on Monday.
"With the wings of the regulators beating ever closer with respect to transparency, then some OTC business may well move onto the exchange."
Increased scrutiny of London's financial markets since the LIBOR scandal has led to tighter regulatory capital requirements, increasing the push for trades that were once routinely carried out between counterparties to be performed on the exchanges.
Clearing, where an exchange acts as an intermediary to settle trades, is seen by some as an inevitable progression for the gold market.
"The clearing aspect, especially for the market makers, reduces capital charges," one market participant said. (Editing by Veronica Brown and David Goodman)