Tuesday, October 26, 2010

"CFTC's Chilton Sees 'Fraudulent Efforts' to Control Silver Prices" (JPM; SLV)

Gee, ya think?
This is one of the areas where I cut my teeth as a baby analyst, along with oil E&P; insurance; electric and gas utilities and really slow computers.
The silver market manipulations were so widespread and so well known that it was taken as structural.

Two years ago MarketBeat had a post "Silver Probe Cheered By Investors". I was so bored with the topic that I got a bit tangential in my comment:
  • There aren’t many commodities with the equivalent of the “Silver Users Association” whose raison d’état is to keep silver prices down.
    The SUA was very unhappy with the introduction of Barclays silver ETF.
    On a related note, I have a friend who was in the room when a (very) large commodity trader said “Those Hunt boys don’t know what deep pockets are”.
    Within a week both the CBOT and the COMEX went liquidation only.
    A lot of opacity in that market.
    A creative type could probably get a pastiche out of Robert W. Service’s Creamation of Sam McGhee:

    “There are strange things done in the midnight sun
    By the men who moil for gold;
    The Arctic trails have their secret tales
    That would make your blood run cold…”
    I keep getting tripped up by “LaSalle St.”
The LaSalle Street canyon ends at the CBOT building.

The CBOT merged with the CME in 2007, it is now one of the CME's Designated Contract Markets, along with the NYMEX and the COMEX.
Enough with this stroll down memory lane, here's the story from the Wall Street Journal:

A federal futures regulator said on Tuesday he believes there have been numerous attempts to fraudulently influence silver-market prices, and he urged the agency to prosecute those who may have violated commodities laws.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission, made his comments at the start of a public meeting where the agency will be proposing new rules to strengthen its antifraud and antimanipulation powers.

The agency's enforcement division for over two years now has been probing the silver market amid a flurry of complaints by investors who have raised fears about potential price manipulation....
...."I believe there have been repeated attempts to influence prices in the silver markets," he said. "There have been fraudulent efforts to persuade and deviously control that price."....MORE
Here's Bloomberg's take:

The silver markets have been subject to “repeated attempts to influence prices,” said Bart Chilton, one of five commissioners on the Commodity Futures Trading Commission, the top U.S. commodities regulator.
“There have been fraudulent efforts to persuade and deviously control that price,” Chilton said in a statement released today, alleging there have been violations of the Commodity Exchange Act. “Any such violation of the law in this regard should be prosecuted,” he said.

The commission began investigating allegations of price manipulation in the silver futures market in September 2008. Before today, silver gained 40 percent this year, touching $24.95 an ounce on Oct. 14, the highest level in 30 years.

“I don’t believe there is any long-term conspiracy to control prices,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “Manipulation can occur in small doses for very short periods of time. Adding regulation may not do the trick of correcting the problems simply because the players are smarter than the regulators and they’ll find another way to game the system.”...MORE
JP Morgan is one of the (if not the) largest bullion banks in the world.
Maybe I should work off of another of Service's poems, "The Shooting of Dan McGrew";
..Then on a sudden the music changed, so soft that you scarce could hear;
But you felt that your life had been looted clean of all that it once held dear;..