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. I would ask you, however, to readjust the proposed formula in silver. 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 too high of a threshold in light of the realities of the world silver market.
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.
Please institute a 1500 contract (7.5 million ounce) position limit for silver.
Additionally, I encourage the CFTC to immediately address the concerns expressed by FMX Connect in its Editorial Comments below. FMX states,
"Electronic trading minimizes the information leakage associated with using brokers, for sure, but it is also allows oligarchic organizations to anonymously manage price movement while hiding behind digital displays. We won’t use the word manipulate, in part because of our libertarian bent, but it’s getting ridiculous. Where there used to be 50 5-lot thieves on the floor now there are five Too-Big-To-Fail banks with infinite fed-sponsored balance sheets doing whatever they please. The idiot locals on the floor, fragmented as they were, served to keep the big banks in check because there was transparency of price and to a large extent, the players were known. This doesn’t exist anymore and we don’t see an end to it."
When and how will the CFTC fix this broken, manipulated, gamed sham of a market?
Respectfully submitted,
D. Mulkey
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(Extract of key portions of FMX's full commentary. See bottom link for entire report.)
Afternoon Gold Fix – February 25, 2011
FMX | Connect (Reported 2/25/2011)
The following is a report of Gold Option’s activity in the Over-The- Counter and Exchange traded venues. Information is compiled and summarized below.
Editorial comment:
It’s becoming increasingly annoying watching dealers buy call and sell puts the day before we rally $20, and then the next day buy put and sell call before we drop $20. Yesterday’s sell off from the 1415 area seemed almost orchestrated. At the very least, the futures selling came in during the thinnest trading hours. While exchanges herald the benefits of electronic trading there is one thing wrong with it. Electronic trading minimizes the information leakage associated with using brokers, for sure, but it is also allows oligarchic organizations to anonymously manage price movement while hiding behind digital displays. We won’t use the word manipulate, in part because of our libertarian bent, but it’s getting ridiculous. Where there used to be 50 5-lot thieves on the floor now there are five Too-Big-To-Fail banks with infinite fed-sponsored balance sheets doing whatever they please. The idiot locals on the floor, fragmented as they were, served to keep the big banks in check because there was transparency of price and to a large extent, the players were known. This doesn’t exist anymore and we don’t see an end to it. Instead of thinning the forest for the trees, technology, regulatory and economic factors have killed the saplings and destroyed market diversity. This translates to a narrow and deep liquidity pool in trading venues; god forbid if one of them fails.
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http://www.fmxconnect.com/fmxmetalsconnect/post/2011/02/25/Afternoon-Gold-Fix-ndash3b-February-25-2011.aspx
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