Comment Text:
Chairman Gensler,
The CFTC's stated mission is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.
As you deliberate the issue of imposing position limits on commercial entities whom allegedly possess large non-economic short positions in the silver market, it is appropriate you brief the public on the status of your agency's 2 1/2-year investigation of JPM and HSBC and their alleged manipulation of the silver market.
It would also be helpful if you would explain the Commission's thought process and decision to approve JPM's expedited request for a COMEX Vault License, given the fact that JPM allegedly holds a large number of non-economic short paper positions in the silver, while simultaneously serving as the custodian of the iShares Silver Trust (SLV, Silver ETF), and while being under investigation by your agency as a market manipulator in the paper silver market.
There are a number of apparent policy and decision-making inconsistencies you might want to address and clarify for the investing public in order to assure investors you and CFTC have their best interest at heart.
DM
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J.P. Morgan Chase, HSBC May Have Gained Billions from Influencing Silver Prices
Mar. 25 2011 - 1:46 pm | 1,973 views
By TRACEY GREENSTEIN
For most, the Stock Market is a daunting and complex system of numbers and codes. The intricacies of each push, shove and nod toward an investment that is seemingly worthy of buying or selling may be intimidating. But in the case of silver, it’s black and white: when you own the market, you control the market.
Mega-banks J.P. Morgan Chase and HSBC have been under suspicion for manipulating the value of precious metals, particularly silver, since 2008. A recent article in the New York Times alleged the two companies have earned billions of dollars from what could be a gigantic, market manipulation. Allegations state that JP Morgan and HSBC spread a rumor that the value of silver would depress dramatically. Of course, the claims were artificial, but because they owned such a substantial cut of commercial net short silver futures, they were essentially the silver market makers. When the price of silver plummeted based on their continued bearish actions, JP Morgan and HSBC cashed in.
JP Morgan and HSBC together “controlled over 85 percent of the commercial net short positions” and “a market share in excess of 90 percent of all precious metals derivative contracts, excluding gold,” according to the New York Times. Short positions are essentially bets that the value of an investment will move downward. For JP Morgan and HSBC, these short positions were a sure thing; when you own 85 percent of the silver market short positions, it’s easy to drive the market down and reap the benefits.
A class-action lawsuit by a Florida futures trader filed charges against JP Morgan and HSBC, claiming that:
“The conspiracy and scheme was enormously successful, netting the defendants substantial illegal profits in billions of dollars between June 2008 and March 2010.”
The lawsuit was filed in a federal court in the Southern District in New York, as reported by the New York Times.
The Commodity Futures Trading Commission, an American, federal watch-dog agency, oversees trading in precious metals. In 2008, they received hundreds of complaints that JP Morgan and HSBC were manipulating silver future prices, and began an investigation.
Two and a half years later, no significant action has been taken and no entities or individuals have been prosecuted. The mystery remains unsolved.
http://blogs.forbes.com/traceygreenstein/2011/03/25/j-p-morgan-chase-and-hsbc-may-have-gained-billions-from-influencing-the-price-of-silver-2/
