Comment Text:
Dear Chairman Gensler and fellow Commissioners:
I urge you to approve the staff’s proposal on position limits, including limiting exemptions to bona fide hedgers. However, the proposed formula in silver needs to be readjusted. The current formula would result in a position limit of over 5,000 contracts for any single speculator, on an all-months-combined basis. 5,000 contracts is the equivalent of 25 million ounces of silver. This is far too high of a threshold given the small size of the world silver market compared to almost all other commoditites.
There are only three mining companies in the world who produce more than 25 million ounces of silver per year and only a similar number of industrial consumers using more than that amount. Any speculator holding an amount of silver derivatives greater than what 99% of the world’s silver producers and consumers make or use in a year would have inordinate pricing power. The purpose of speculative position limits is to prevent such a circumstance.
The result of such pricing power has been and will be to artificially depress the price of silver. The Commission should consider the economic and national security implications of a depressed silver price. Reduced supply will result as the reduced return on investment for miners will cause mine closures (think jobs lost) and future project abandonment (think reduced jobs growth). Silver is critical to energy infrastructure, importantly including solar & wind power and also defense electronics. There is a global competition for the very limited supply of above-ground silver. China could easily buy THREE TIMES current world production just to convert 25% of future electricity needs to wind generation. Where would that leave the U.S.?
Please institute a 1500 contract (7.5 million ounce) position limit for silver.
Respectfully submitted,
Michael P. Rank
