By Roberta Rampton and Ayesha Rascoe Reuters Tuesday, October 26, 2010
WASHINGTON -- There have been repeated attempts to influence prices in silver markets, Bart Chilton, a commissioner at the U.S. futures regulator, said today.
"There have been fraudulent efforts to persuade and deviously control that price," Chilton said in prepared remarks before a Commodity Futures Trading Commission meeting.
Chilton said he could not pre-judge the outcome of the CFTC's ongoing investigation of the silver markets but said public deserves some answers to their concerns.
CFTC's Chilton Sees 'Fraudulent Efforts' to Control Silver Prices
By Sarah N. Lynch The Wall Street Journal Tuesday, October 26, 2010
WASHINGTON -- 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 anti-fraud and anti-manipulation 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. The CFTC hasn't provided any updates on the investigation, and Mr. Chilton said he thinks "the public deserves some answers to their concerns that silver markets are being, and have been, manipulated."
"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."
He urged prosecution of those who may have violated the law, but said he can't prejudge what the agency will do with its investigation.
Silver Market Faced 'Fraudulent Efforts' to Control Prices, Chilton Says
By Asjylyn Loder and Pham-Duy Nguyen Bloomberg News Tuesday, October 26, 2010
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."
The agency spent five years investigating an effort by the Hunt brothers to corner the silver market in 1979 and 1980. That effort drove futures prices up from about $2 to as much as $50 per ounce before the commission forced the brothers to sell off their silver holdings and the price collapsed.
The law prevents him from divulging traders' names or information about their positions, Chilton said in the statement. The commission should release more information "in the very near future," he said.
CFTC unveils new tools to stop market manipulation
By Roberta Rampton and Ayesha Rascoe Reuters Tuesday, October 26, 2010
WASHINGTON -- The U.S. futures regulator laid out plans on Tuesday for how it could use new and beefed-up legal tools to foil traders who seek to manipulate prices or defraud investors.
The Commodity Futures Trading Commission said it also wants to ask for comments on whether to crack down on certain practices used by high-frequency traders -- such as "quote stuffing" -- but it stopped short of immediately proposing new rules specifically aimed at algorithmic trading.
In its latest set of proposed regulations following a sprawling Wall Street reform law, the CFTC sought to clear up some confusion about its traditional test for price manipulation, an effort to improve on its dismal record of having won only one such case in its 36-year history.
The rule, which will apply to all markets overseen by the CFTC, including swaps, also creates a "broad, catch-all anti-fraud provision" that does not require the CFTC to prove a trader fully intended to cause fraud, CFTC officials said.
The agency's only successful manipulation prosecution was against a broker charged with manipulating settlement prices for electricity futures in 1998.
More recently, manipulation charges against four propane traders with BP were dismissed by a judge, who called the law "confusing and incomplete." BP agreed to pay a record $303 million to settle related charges.
CFTC officials who briefed reporters on the new package of proposed regulations declined to say whether the rules would have helped them make their case against the propane traders.
The agency's five commissioners, including Chairman Gary Gensler, will vote at a public hearing today on whether to advance the proposal for public comment for 60 days.
After staff consider whether to make changes based on comments, the commissioners will need to vote again to finalize the plan by next July.
The new rule seeks to marry existing anti-fraud and anti-manipulation authorities together with a new section that "fills in all the gaps," an official told reporters.
Existing regulations address "plain vanilla" person-to-person fraud, and price manipulation, such as market "corners" or "squeezes," he said.
But the new provision could capture manipulative trading activity that "could potentially fall out of one of those two buckets," he said.
Before, price manipulation cases required the agency to prove traders had the intent and ability to manipulate prices, tried to do so, and caused an "artificial price."
That four-part standard will continue to exist, but the CFTC included guidance that "artificial price" means a price affected by illegitimate market forces, the official said.
The Dodd-Frank law also requires the CFTC specifically to ban three disruptive trading practices as of July 16, 2011 -- a ban that does not require new regulations to take effect.
Included are "spoofing," whereby traders make bids or offers but cancel them before execution, and "banging the close" -- acquiring a substantial position leading up to the close of trade, then offsetting the position in the final moments to manipulate the closing price.
The agency has no obligation on whether to go further, but wants to gather more comments during the next two months about whether it should close a potential loophole in the spoofing ban, or prohibit any other practices deemed disruptive.
That will include "quote stuffing" -- flooding the market with large numbers of rapid-fire orders and then canceling them almost immediately -- a practice that some have argued contributed to the May 6 stock market "flash crash."
The agency will also ask whether it needs to write rules requiring traders to test and monitor their algorithms.
For months CFTC commissioners have said the agency needs to use its new powers to counter disruptive trades made by high-frequency algorithms.
Bart Chilton, a Democratic commissioner, and Scott O'Malia, a Republican, have said regulators should hold traders responsible for "rogue algos" that hurt markets.
Posted: Nov 03 2010 By: Dan Norcini Post Edited: November 3, 2010 at 11:24 pm
Dear Friends, The price action in the Dollar after today’s release of the FOMC statement from their early November meeting generated a great deal of price volatility in the currency markets this afternoon. When the initial knee jerk reactions were finished and the more sober-minded had some time to digest the repercussions of nearly ONE TRILLION DOLLARS of QE, the Dollar came under pressure which took it down below the 77 level which had temporarily been serving as downside support in front of today’s meeting.
The technical damage is becoming quite severe as it is now perched precariously above an important support level near 75. Judging from the fresh sell signals being generated by more than a few technical indicators, it is difficult for me to see how it can maintain its footing above this level barring a sudden and unexpected improvement in the various US economic statistical releases of the next couple of weeks. In short, it would not take much to see the Dollar drop through 75 and then plummet down towards 72, a level, which if broken, would prove to be a watershed moment for our nation.
I would suspect that we would see some sort of attempt to prop the Dollar on its first approach towards 72 but that would only stem the decline for a brief period unless the QE were withdrawn or the monetary authorities were to walk back on the size and scope of today’s announcement. That would of course necessitate a dramatic improvement in the economy which is why I cannot see that occurring.
It is my opinion that the US has long wanted to engineer a manageable decline in the currency on account of the now mathematically-impossible-to-ever-pay-back debt load that our nation has been saddled with. They will get their wish but at a terrible cost to the rest of us and to the nation at large as it watches its economic supremacy gradually fade. That will be the legacy of the Federal Reserve system and the contemptible monetary authorities who sold out our nation’s birthright for a bowl of stew.
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