Is this the JP Morgan cornering the silver market thing?

I’ve not been paying attention to this as I regarded it all as just another conspiracy take. That JP Morgan – and or some traders – were cornering the global silver market. That they’d watched the Bunker Hunts and worked out how to do it successfully. It’s one of those things that’s been on the investment boards for ages.

Thing is, is it actually true?

Two current and one former precious metals traders at JPMorgan Chase have been charged with manipulating futures markets in what prosecutors described as a massive, multi-year conspiracy run out of the bank.

The US Justice Department said three men ripped off market participants and even clients as they illegally moved prices for gold, silver, platinum and palladium.

Prosecutors allege that over eight years and thousands of unlawful trades the men engaged in activities that resulted in them being charged with multiple counts of fraud and conspiracy, including racketeering.

Is that what this is? Or are we talking about something more like Libor? Where people were fiddling the fix by a couple of basis points to favour their own futures positions?

The difference. If it’s an attempted corner then the price has been out by tens of dollars an ounce – which is the wilder claim I’ve seen. If it’s like Libor then it’s a cent at most out, and either way on any particular day. Anyone know more about this case?

4 comments on “Is this the JP Morgan cornering the silver market thing?

  1. Spoofing. No attempt at cornering the market. Instead placing orders with an expectation they would be cancelled.

    Classic is you want to sell at the offer. You place a huge buy order just below the current bid. Anyone who was offering to pay the bid-side is worried that the market is going up, instead of waiting to see if someone trades with them they pay the offer price. You have “tricked” someone into letting you sell at the offer, you cancel the large buy order that you used to distort the picture of supply-demand.

  2. Yet another fine example of screen trading. When markets had proper dealers who knew what they were doing,, a stunt like that would have stunk right across the floor. First thing you ask yourself. Where’s the stock supposed to be going? Why only a single buyer? If you can’t get reassurance, you don’t put the bid into the market. You have your own reputation to consider

  3. Don’t get me started.

    This is spoofing, which is the prosecutors’ favorite crime. Sounds scary, and relatively easy to prove, given the electronic fingerprints.

    However, it doesn’t even rise to the “few basis points” level in terms of impact. In the Sarao (“Hound of Hounslow”) case from a few years back, the government’s own expert found that his spoofing trades moved the market . . . one seventh of a basis point on average. Moreover, spoofing tends to cause the price to oscillate in these small magnitudes, rather than moving up (or down) and staying at (distorted) levels for an appreciable period of time.

    I’ve written several blog posts and an article in The Hill criticizing the US government’s obsession with this conduct. I can post links if you’re interested.

  4. ” spoofing tends to cause the price to oscillate in these small magnitudes, rather than moving up (or down”

    Well yes, it has to, doesn’t it? If the spoof is on the bid side then the spoofers have to be unloading. Which corrects the price.
    But the thing never gets mentioned, you can only do this in a thin market. Where you have a volume of buys & sells going through the market will keep correcting the variance the spoof has caused because there will always be bids & offers waiting at various levels…

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