Calling all Manipulation Theorists

Discussion in 'Silver' started by wrcmad, Aug 5, 2020.

  1. Pirocco

    Pirocco Well-Known Member

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    The problem with the silver market is that the forward/future component in the spot price is % wise much bigger than golds. It's the reason for the very volatile price, which, in turn, causes people "riding the silver market" - they "ride" the bulls then take the grabbed money to other markets. Therefore, the silver market is constantly drained off.
    The gold<>silver swaps are such example case.
     
  2. President Trump

    President Trump Active Member Silver Stacker

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    I‘m not sure how you are saying the mechanics of such a trade would work. But if this consistently made money wouldn’t people do it until the arbitrage no longer existed.
     
  3. bron.suchecki

    bron.suchecki Well-Known Member

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    Chris' comments don't refute or address Keith's argument. Saying that a bullion bank's short may be on behalf of someone else doesn't void the fact that whoever that someone is, they aren't as desperate as the longs, because the basis declines into expiry. And it is not a case of if that someone if the government that you can say they have an unlimited checkbook because they are short so if long stand for delivery it is physical the short has to have, not cash (the US strategic silver stockpile is long gone).

    The biggest facilitators of manipulation if you think about it is the longs, because they accept and trade paper futures and don't want physical. If they left the futures markets and bought physical then the price would rise, as you can't print silver. But that is even a pipe dream because the point of futures is leverage and the speculative longs only have 10% (or whatever the margin rate is) to put down, so current OI does not reflect the amount of physical that could be bought if futures longs wanted physical.
     
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  4. alor

    alor Well-Known Member Silver Stacker

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    someone would see badman /batman
    the cat is the manipulator
    ? to ask is how much is the cost to keep the price there and for how long...while you buy up mines and warehouses full of metals
    in such a small market, such actions would have been easily notice
    so the manipulator is employed :)
    [​IMG]
     
  5. STKR

    STKR Well-Known Member Silver Stacker

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    I agree, it doesn't refute his argument but Chris did address the focal point about the speculative nature of the banks. Chris responded to the argument by saying that even if the banks are arbitragers, then who are their clients and why do they hold the positions they do? And are the client positions of a serreptitious nature? His message was that disproving the speculative nature of the banks does not disprove the price suppression theory from Ted Bulter, or in general.

    But the fact is that only a minute % of contracts result in longs standing for delivery. Understanding this, the threats to deliver the physical metal could be calculated and managed by the banks and their clients.

    I agree, and I think Keith's article made a very clear point that the buyers in the market are predominantly speculators. I do, however, find it understandable that the large short positions of the banks (and/or their clients) may be used to curtail long speculation and manage the market.

    It would likely be more evident to you than most that when spot prices begin to rise, physical investment demand increases.
    'Managing' the long speculators on the COMEX could also aid the management of demand for physical investment, which could further assist the management of the spot price by reducing overall physical demand.

    (I'm not trying to be smart with this question, I genuinely want to hear and value your perspective)
    With your knowledge of the markets; If you were to have the power and an agenda to suppress the price of silver, how would you accomplish this?
     
  6. Pirocco

    Pirocco Well-Known Member

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    The cat is looking at the silver price on 9 september 2020.
     
  7. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    Well, well.
    Funny how reliable the market is for finding fair price.... up or down. :D
     
  8. Pirocco

    Pirocco Well-Known Member

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    Mechanics of a trade?
    There is a spot price - a current price, and a number of futures prices coupled to future months.
    Those futures prices are calculated based on the taking (at just a small margin cost) of futures positions (long-buy order/short-sell order).
    When there is a difference between the spot and a future price, the market runners provide a profit for those that take the positions that bring spot towards future price. That is what you name "arbitrage". This is not what I talked about.
    I talked about the taking of the original-the first futures, the ones taken to hedge (= compensate profit and loss) a buy or sell order against price changes. Those are bogus orders, they are just taken to move the silver price artificially, in a favorable for the taker - direction. When the real order is executed, the bogus orders are dumped (or neutralized along a same amount inverted positions), by both sides of the futures contract.

    Imagine a primary dealer, wants to order 100000 ounces silver from a bullion bank, to deliver over 1 month.
    The problem is price risk. It is possible that the price will be higher (risk of primary dealer) or lower (risk of bullion bank).

    The dealer places the order at the bullion bank, AND also takes a 100000/5000=20 long positions (=100% hedged).
    The bullion bank takes 20 short positions.

    See what just happened? A futures contract between two parties, that are NOT eachothers "opponents", NOT eachother "counterparties", they don't act against eachother, they act against a price change due to speculators buying or selling, that could otherwise inflict hem losses.
    And the principle? That's inflicting that common enemy, the speculator, a higher price when buying, or a lower when selling, along those bogus orders named "futures contracts", that they cancel (out) when the real market order (the 100000 ounces silver) is executed.

    Futures markets were brought into existence for this. Just like central banks manipulate money supply and intrest rates, the manipulate the spot prices of the products that receive attention from savers>speculators.

    So those stories about futures market entities acting against eachother, are scams. A futures market is the opposite, it's a cooperation against third parties - not among their club: savers>speculators.
     
  9. President Trump

    President Trump Active Member Silver Stacker

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    Thank you for explaining that. Please can we see if we are on the same page.
    I understand what you have said, so lets follow the money and if you wish you can point out any misunderstanding of mine. We will use your example.

    Step 1 A Primary Dealer wants to order 100000 ounces from bullion bank for delivery in one month. There is a price for silver at this time but I believe you are saying that payment is not made at this time because you have said the risk of the silver price going up is with with Primary Dealer and the risk of the price of silver going down is with the Bullion Bank. Lets call this transaction the "Primary Transaction".

    Step 2. You say is that each goes to the futures market and hedges their respective price movement risk. Lets call this transaction the "Hedging Transaction".

    I hope I have followed you correctly so far.

    So the Primary Transaction is ultimately conducted at the spot price, but it is the spot price payable in one month. Each party cares about the price movement that may happen within that month so they enter into the Hedging Transactions.

    Lets look at the Hedging Transactions.

    The Primary Dealer once he has entered into the Primary Transaction is required to buy at the price of silver in a month. He is effectively short for 1 month. That is, if Silver goes up he will have exposure. If he doesn't want this he must get long. He does this by buying a futures contract. I agree that his counterparty under this contract has nothing to do with the parties to the Primary Transaction. But the Primary Dealer's objective is fulfilled. If the price goes up he will receive the net price rise which hedges his risk.

    The Bullion Dealer once he has entered into the Primary Transaction is required to sell at the price of silver in a month. He is effectively long for 1 month. That is, if Silver goes down he will have exposure. If he doesn't want this he must get short. He does this by selling a futures contract. If the price goes down the Bullion Dealer will receive the net price fall which hedges his risk.

    Lets look at the Futures market.

    The parties to the Primary Transaction able to hedge their respective risks because there are speculators that buy and sell commodity price movement risk ie Futures contracts. It is true that once the Primary Transaction has completed the Primary Dealer and the Bullion bank will not continue to hold the hedge. The contract will be sold or will be cash settled. I do not understanding where you are saying the manipulation has occurred.
     
  10. Pirocco

    Pirocco Well-Known Member

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    Your second last sentence answers your last sentence.
    What I named "bogus order". They order (buy or sell) X ounces, and place a 100% hedge - the bogus order that the futures position is, doubles the price effect of the order to 2X. Meaning that during the period inbetween the X ounces order and its delivery, that they have artificially increased or decreased to price for those that buy/sell during their exposure. And that extra cost is the ultimate source of the price change compensating dollar amount that their hedge delivers.
    Those that
     
  11. President Trump

    President Trump Active Member Silver Stacker

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    That doesn't make sense to me.

    On Day 1 the price is X. A price everyone can see and trade.
    On Day thirty the price may have gone up or down but whatever that price is it is still a price that everyone can see and trade.
    In your example the Primary Dealer and Bullion Bank have simply entered into a transaction where someone pays them or receives from them the price movement between day 1 and day 30. This price movement hedges their risk as I described. It is just the price movement and the payment is as a result of the price movement it didn't cause it.
    By definition a person who goes long and then hedges the price movement also goes short. Actually what you are thinking is a double price effect is an exactly neutral price effect.
     
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  12. alor

    alor Well-Known Member Silver Stacker

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  13. STKR

    STKR Well-Known Member Silver Stacker

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  14. alor

    alor Well-Known Member Silver Stacker

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    just cost of doing business
    notorious money laundering from China opium trades, we know who
    the law is selectively enforceable too
     
  15. Nickoru

    Nickoru Member

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    While more and more trillions of USD being wired from keyboards into banks and markets, PMs plummet (11 Aug)? Come on! It's a deliberate action, the command to stop natural rise. Since 1930s gold multiplied from 30$ up to 2000$. This steady process shows devaluation of fiat. US market is a leading financial center, sucking in capital from all countries, where overbought companies never cease to rise. If silver and gold are allowed to climb, people will be lured to invest and store their income not in deposit or stocks but PMs. PMs are produced in many countries, thus capital will stay in corresponding places instead of moving in a single main direction to US. This will not be allowed for as long as possible at all affordable costs.
     
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  16. alor

    alor Well-Known Member Silver Stacker

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    its so cheap < 1 Berrie

    https://cftc.gov/PressRoom/PressReleases/8260-20

    Release Number 8260-20
    CFTC Orders JPMorgan to Pay Record $920 Million for Spoofing and Manipulation

    September 29, 2020

    Washington, D.C. — The Commodity Futures Trading Commission today issued an order filing and settling charges against JPMorgan Chase & Company (JPMC & Co.) and its subsidiaries, JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC (JPMS) (collectively, JPM), for manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade. This case is brought in connection with the Division of Enforcement’s Spoofing Task Force.

    The order finds that JPM’s illegal trading significantly benefited JPM and harmed other market participants. JPM is required to pay a total of $920.2 million—the largest amount of monetary relief ever imposed by the CFTC—including the highest restitution ($311,737,008), disgorgement ($172,034,790), and civil monetary penalty ($436,431,811) amounts in any spoofing case.

    “Spoofing is illegal—pure and simple,” said CFTC Chairman Heath P. Tarbert. “This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are. Attempts to manipulate our markets won’t be tolerated. The CFTC will take all steps necessary to investigate and prosecute illegal activities that could ultimately undermine the integrity of the American free enterprise system.”

    “This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. “The CFTC is committed to working with our law enforcement and regulatory partners to eradicate this unlawful activity and to hold those responsible fully accountable.”

    Related Criminal and Civil Actions

    In a parallel matter, the Department of Justice’s Fraud Section and the United States Attorney’s Office for the District of Connecticut today announced entry of a Deferred Prosecution Agreement (DPA) with JPMC & Co., deferring criminal prosecution of JPMC & Co. on charges of wire fraud. Under the terms of the DPA, JPMC & Co. has agreed, among other things, to pay a criminal fine, disgorgement, and restitution.

    In another parallel matter, the Securities and Exchange Commission (SEC) today announced entry of an order filing and settling charges against JPMS imposing both disgorgement and a civil monetary penalty. The CFTC order will recognize and offset any restitution and disgorgement payments made to the DOJ and the SEC.

    Related CFTC Actions

    The CFTC has previously issued orders in related matters filing and settling charges of spoofing against two traders, both of whom have entered into formal cooperation agreements with the CFTC: John Edmonds [See CFTC Press Release No. 7983-19] and Christian Trunz [See CFTC Press Release No. 8014-19]. In another related matter, the CFTC continues to pursue civil litigation against two other traders, Michael Nowak and Gregg Smith, for spoofing and attempted price manipulation [See CFTC Press Release No. 8013-19].

    Case Background

    The order finds that, from at least 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, including the heads of both desks, placed hundreds of thousands of orders to buy or sell certain gold, silver, platinum, palladium, Treasury note, and Treasury bond futures contracts with the intent to cancel those orders prior to execution. Through these spoof orders, the traders intentionally sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled. According to the order, in many instances, JPM traders acted with the intent to manipulate market prices and ultimately did cause artificial prices.

    The order also finds that JPMS, a registered futures commission merchant, failed to identify, investigate, and stop the misconduct. The order states that despite numerous red flags, including internal surveillance alerts, inquiries from CME and the CFTC, and internal allegations of misconduct from a JPM trader, JPMS failed to provide supervision to its employees sufficient to enable JPMS to identify, adequately investigate, and put a stop to the misconduct.

    The order notes that during the early stages of the Division of Enforcement’s investigation, JPM responded to certain information requests in a manner that resulted in the Division being misled. The order recognizes, however, JPM’s significant cooperation in the later stages of the investigation.

    The Division of Enforcement staff members responsible for this case are Mark A. Picard, David C. Newman, Trevor Kokal, Patrick Marquardt, Jordon Grimm, Steven I. Ringer, Lenel Hickson, Jr., and Manal Sultan.



    -CFTC-
     
  17. STKR

    STKR Well-Known Member Silver Stacker

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    8 years... Hundreds of thousands of orders.


    I bet the fines are insignificant compared to the reward. Where's the deterrent? People need to be jailed and the entities involved need to have a greater consequence than just paying fines.

    This isn't the first time the Bullion banks have been caught, and it won't be the last.
     
  18. STKR

    STKR Well-Known Member Silver Stacker

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    Affecting market psychology in a nutshell. Not really an argument anymore, but a fact you would be ignorant to dismiss.

    It's difficult to see how anyone could hold the view that certain market players, i.e the commercial banks, aren't manipulating the market long-term. Considering they seem to favour shorting silver, this could easily be seen as evidence towards long-term price suppression.
     
  19. alor

    alor Well-Known Member Silver Stacker

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    ^ think you are quoting the article, not me
     
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  20. STKR

    STKR Well-Known Member Silver Stacker

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    I definitely was :cool:
     

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