Comment Text:
The silver market has been manipulated by a concentrated short position. You can’t have a manipulation without a concentrated position. The only effective way to prevent concentration is by enacting legitimate speculative position limits. The key is to set the speculative position limits at the right level; not too high, so that speculators control the market, not too low as to restrict trading liquidity.
The proposed position limit for silver comes out way too high, over 5,000 contracts. It’s too high because it gives speculators too much dominance over real world producers and consumers. 5,000 contracts is the equivalent of 25 million ounces of silver. There are only three mining companies in the world who produce more than 25 million ounces of silver a year. In addition, there are only a handful of silver consumers in the world who consume more than 25 million ounces a year. There are hundreds of important miners and consumers who produce or consume less than 25 million ounces of silver a year. Therefore, it makes no sense to empower any speculator who comes along with the ability to hold, long or short, more than the amounts most of the important world producers and consumers make or use in a year.
The proper level for position limits in silver is about 1500 contracts or 7.5 million ounces. That amount is still larger than what the vast majority of the world’s silver producers and consumers make or use in a year.
