In a stunning admission last week at The Silver Summit in Spokane, Washington, CPM Group's President Jeffrey Christian, a long time opponent of silver market rigging claims, admitted that the price of silver was being illegally set on the COMEX trading floor. This admission came during his attempt to prove that there was no silver market manipulation taking place.
Christian's assertion was that the wild swings in the price of silver were not being caused by rogue market riggers but by multiple computer algorithms and High Frequency Trading programs firing at the same time in the COMEX silver exchange based on the same program triggers. Christian claims that the simultaneous nature of these trades spring from all trading houses using the same algorithms they learned in the same colleges.
Trading volumes on the COMEX supports this assertion as the COMEX is on track to trade over 80B equivalent ounces of silver derivatives in 2013 which is 1,800x the amount of Registered Physical Silver in the COMEX inventories(44M oz).
What Christian describes is ILLEGAL and the CME Group who owns the COMEX should immediately shut down all HFT's and computer trading programs stopping this continued distortion of silver prices.
OPEN LETTER TO THE CFTC
October 29, 2013
Commodities Futures Trading Commission 3 Lafayette Center 1155 21st St. NW Washington, DC 50581
Re: Illegal COMEX Price Setting
ATTN: CFTC Commissioners:
In a stunning admission last week at The Silver Summit in Spokane, Washington, CPM Group's President Jeffrey Christian, a long time opponent of silver market rigging claims, admitted that the price of silver was being illegally set on the COMEX trading floor. This admission came during his attempt to prove that there was no silver market manipulation taking place.
Christian's assertion was that the wild swings in the price of silver were not being caused by rogue market riggers but by multiple computer algorithms and High Frequency Trading programs firing at the same time in the COMEX silver exchange based on the same program triggers. Christian claims that the simultaneous nature of these trades spring from all trading houses using the same algorithms they learned in the same colleges. Trading volumes on the COMEX supports this assertion as the COMEX is on track to trade over 80B equivalent ounces of silver derivatives in 2013 which is 1,800x the amount of Registered Physical Silver in the COMEX inventories(44M oz).
Unfortunately for Christian and the CME, what he describes is an artificial price setting mechanism for silver in an exchange that is specifically regulated such that it does not "set" silver prices but rather is a "price discovery" exchange. What Christian describes is ILLEGAL and the CME Group who owns the COMEX should immediately shut down all HFT's and computer trading programs stopping this continued distortion of silver prices.
Regulating the futures and options markets such that they DO NOT set an artificial price of a commodity is specifically why the CFTC hires Economists to oversee the Silver derivative markets(futures and options are derivatives). Weighing the stable supply/demand dynamics of the silver industry(0-5% annual volatility range) against the volatile COMEX trading activity and price fluctuations(over 100% annual volatility swings) is the proof that the price of silver is being artificially determined by derivatives as Christian suggests.
The legal concept is fairly simple, the trading of futures and options should not be the overriding price influence in setting the price of any commodity as it does not reflect the true supply/demand dynamics of the underlying commodity being traded.
Jeffrey Christian is the leading authority on commodity derivatives with experience in advising the largest players in the paper/electronic silver space such as the IMF, World Gold Council, Central Banks, Bullion Banks and Global Mining Companies. Before CPM Group spun off from Goldman Sachs in the 1980's, Christian worked with Robert Rubin who advocated and developed Gold Leasing Programs for Central Banks and National Treasuries(although Germany is still trying to unwind their leased gold). In the 1990's Christian advised companies on how to properly hedge their gold production(although massive Billion dollar write downs were taken as the price of gold rose in the 2000's). Christian is currently leading the charge to restart miner hedging programs as he advocates hedging once again to offset the price volatility on the COMEX...
WAIT! This silver price volatility is caused, according to Christian, by multiple computer algorithms and High Frequency Trading programs firing at the same time and is NOT a freely traded price of silver!
Any hedging on false COMEX price discovery is an accident waiting to happen...AGAIN!
It is imperative that the CFTC investigate and stop such illegal price influencing actions on the COMEX as it is destroying the true price discovery mechanism for silver. Companies and individuals are making bad decisions based on faulty price data originating out of the COMEX.
Silver investors should demand an explanation from the CFTC and
the CME as to Jeffrey Christian's claim that price fluctuations in
silver are being initiated and caused by computer driven trading
that artificially influences the "Fair Market Value" of silver.
I want to thank Jeffrey Christian for bringing this to the attention of all who attended the Silver Summit as it explains WHY the price of silver is so volatile in an underlying industry that should, by all accounts present at the Summit, be stable and predictable.
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