JP Morgan Cuts Silver Short


". . .and denies holding 90% of LME copper stock warrants."

JP Morgan was uncomfortably in the spotlight Tuesday amid reports it had amassed a large, copper long position and was unwinding a big silver short. The reports have placed the bank in the public eye at a time when U.S. and European regulators are cracking down on commodity market concentration.

JP, which joined Goldman Sachs and Morgan Stanley at the top tier among commodity traders with the acquisition of the RBS-Sempra operations earlier this year, is reducing a large position in U.S. silver futures, the Financial Times reported, citing a source familiar with the matter.

LME data revealed that a single entity increased its control over warehouse copper stocks and cash contracts to more than 90%, up from the 50%–80% reported for the past several weeks. A JP Morgan spokesman denied the company held over 90% of stock warrants but declined to state any dominant position less than that, saying only that its silver futures positions would be "materially smaller" in the future.

In October, JPMorgan and HSBC were hit with two lawsuits in late October by investors who accused them of conspiring to drive down silver prices and reaping hundreds of millions in profit.

Open interest in U.S. silver futures SIc1 has declined nearly 20% since November, while prices have surged to 30-year peaks—trends market analysts believe suggest short covering has helped fuel the gains.

JP Morgan and HSBC were accused in the lawsuit of manipulating the market for COMEX silver futures and options contracts from H108 by amassing huge short positions designed to profit when prices fall.

If it's been selling futures without an offsetting hedge since 2008, the banks would have missed out on the biggest silver rally since the Hunt Brothers attempted to corner the market 30 years ago.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe