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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
 Posted - 09/26/2008 : 18:48:57
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Looks like the uncivil servants are finally doing their job
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CFTC Relents and Probes Silver Market
With silver prices falling this past summer, silver bugs world-wide set out to prove that their metal was in short supply and market manipulation was at work. They bombarded federal regulators with hundreds of emails crying foul play and demanded answers.
Though such pleas proved futile in the past, this time the rousing chorus grabbed regulators' attention. On Wednesday, the Commodity Futures Trading Commission confirmed that there's an investigation into the silver market.
The CFTC isn't yet convinced there's systemic wrongdoing and in May published a report saying as much. But the agency decided to take a fresh look, in part to show critics that it checks out complaints, and also to make sure there isn't something new to uncover.
"We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it," said Stephen Obie, acting director of the agency's division of enforcement.
Silver investors have argued that a handful of U.S. banks have been controlling a large portion of silver's short positions -- or bets that prices will decline -- on Comex division of the New York Mercantile Exchange. Official data from the CFTC showed that two U.S. banks had increased short positions in the silver futures market between July and August by 450% and controlled 25% of the total open interest.
"The proof that this selloff was criminal lies in public data," wrote Theodore Butler of Cape Elizabeth, Maine, in August in a silver newsletter. "The concentrated sale of such quantities in such a short time" caused silver's fall, wrote Mr. Butler, who for many years has been vocal about purported silver-market manipulation. In September he reiterated to readers that they should email the CFTC.
The CFTC had argued in May that the large banks that people assailed for manipulating the market were instead acting appropriately as market makers, who take on futures positions to offset their exposure in over-the-counter markets. Therefore, these traders aren't "naked shorts" and won't benefit from long-term depressed silver prices. Many analysts agree with the agency's conclusion.
Silver stalwarts weren't persuaded. Jason Hommel, a newsletter writer based in Penn Valley, Calif., directed readers to visit their local coin shops at 2 p.m. on Sept. 2 to size up for themselves whether there was a silver shortage. From Michigan to North Carolina and beyond, he says, investors trekked to coin shops.
Many reported no silver for sale.
Bart Chilton, one of the CFTC commissioners, said he has received about 700 emails from silver investors since August, far more than the estimated 100 he received from May to July. Mr. Chilton, a Democrat who has criticized the CFTC as doing a poor job communicating with consumers, says he has spent nights and weekends personally answering emails.
....That the enforcement rather than oversight division is taking on the issue marks a difference from the CFTC's previous efforts regarding the silver market. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.
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The CFTC had argued in May that the large banks that people assailed for manipulating the market were instead acting appropriately
(The same way banks acted appropriately in making sub-prime loans?)as market makers, who take on futures positions to offset their exposure in over-the-counter markets.
As far as the CFTC overseeing the markets, silver or otherwise I present these two points to consider (I may have mentioned the first one previously)
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Does the CFTC care about manipulation?
....Third paragraph down-
Our Market Surveillance Section has a staff of 48 people, 24 of whom are trained economists whose sole purpose is to monitor all of the markets we oversee in order to detect and deter manipulation.
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A staff of only 48 people to keep an eye on what goes on with all of the millions of commodity contracts and who-knows-how many dealers are out there, a staff of 48 to watch it all?
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Concerning the CFTC in the eyes of congress we get this
From Nightly Busniess Report Sept 11th-
Walter Lukken Acting Chairman of the CFTC was talking in
front of Congress saying there doesn't appear to be any manipulation in the oil markets,
Meanwhile senate Democrats armed with the report from hedge fund manger Michel Masters, drew the opposite conclusion
Senator Byron Dorgan Democrat North Dakota said oil prices didn't start falling until Congress started asking questions.
The most memorable quote from Sen. Dorgan
"We have a brain dead regulator here, the CFTC is brain dead, content to do nothing."
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Content to do nothing, that pretty much sums it up.
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siver probe by CFTC
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