Monday, December 17, 2012

UBS bankers ( 36 ) to be implicated in Liborgate - but no manipulation can be found for gold or silver ?


UBS is expected to pay as much as 1.6 billion dollars to settle charges of Libor rigging with US, UK, and Swiss authorities, according to Bloomberg. The settlement is over alleged rigging of the yen Libor interest rate starting in 2007. However, unlike a majority of recent bank settlements where the banks neither admit to nor deny the allegations, the Japanese subsidiary of UBS will reportedly plead guilty to a criminal charge. In addition, about three dozen bankers and senior managers will reportedly be implicated in the alleged rigging.
There have already been a few arrests, but not all the implicated bankers will face criminal or civil charges. The Financial Times reports that even with an admission of guilt, UBS will not lose its ability to conduct business in Japan. We talk to former Special Inspector General of TARP and author of “Bailout,” Neil Barofsky, about what an admission of guilt would mean for too big to fail banks.Plus, prosecutors recently decided not to indict HSBC for money laundering, as government officials were reportedly concerned over the repercussions to the financial system.

Too big to jail.........

36 UBS Bankers To Be Implicated In Liborgate, Criminal Charges To Be Filed

Tyler Durden's picture

As the fallout of Liborgate escalates, the next big bank to be impacted in the fallout started by Barclays civil settlement "revelation" is set to be troubled UBS, already some 10,000 bankers lighter, where as many as three dozen bankers are reported by the implicated in the fixing of the rate that until 2009 was the most important for hundreds of trillions in variable rate fixed income products. Only instead of attacking the US or even European jurisdiction, where the next big settlement is set to hit is Japan: a country whose regulators as recently as half a year ago promised there were no major issues with Libor, or Tibor as it is locally known, rate fixings. And while this most recent development will have little material impact on UBS' ongoing business model, the one difference from previous settlements is that it will likely include criminal charges lobbed against some of the 36 bankers.
From the FT: "UBS is close to finalising a deal with UK, US and Swiss authorities in which the bank will pay close to $1.5bn and its Japanese securities subsidiary will plead guilty to a US criminal offence. Terms of the guilty plea were still being negotiated, one person familiar with the matter said on Monday, adding that the bank will not lose its ability to conduct business in Japan. The pact between the bank and the US Commodity Futures Trading Commission, US Department of Justice, UK’s Financial Services Authority and UBS’s main Swiss supervisor Finma is expected to be announced on Wednesday, although last minute negotiations continue."
Not all of the three dozen individuals will face criminal or civil charges and the level of alleged misconduct varies among them. While it also is not clear how many bankers will be criminally charged, people familiar with the investigation said the settlement documents will document an intercontinental scheme to manipulate the Yen-Libor interest rate over several years involving desks from Tokyo to London.

The UK FSA has also notified at least five individuals linked to UBS that they are being personally investigated in connection with Libor. The watchdog has the power to impose fines and ban people from working in London’s financial services industry.

Criminal and regulatory investigations of individuals often take significantly longer than cases against institutions. The global settlement reached with Barclays over the summer did not include any charges against individuals, but several bankers are under criminal investigation, according to people familiar with the matter.
To a big extent, the reason why so many banks have given up on Libor and are now eager to settle comparable allegations, is because in a world in which not banks are primary counterparties to other banks, but central banks onboard all the counterparty risk, especially in Europe, Libor is now an anachronism - an unsecured lending rate remnant from another time, a time when there was risk a bank may fail without dragging its host central bank. That time is now gone, and as a result the only relevant metric now is how effectively can banks flush to the gills with excess reserves courtesy of various central banks, use said capital to generate a return on (central bank) capital, and a high enough ROE to keep shareholders happy.

Which is why even as banks are settling Libor allegations left and right, and even willing to throw some low-level traders under the bus because just like Fabulous Fab Tourre,nobody else had any idea of the criminal rate manipulation that was going on, and certainly not the corner office, what banks are really doing is learning from the master of trading - that would be none other than Steve Cohen - and experimenting with becoming the best hedge fund out there. Because in the new zero NIM normal, where money can not be made by traditional lending verticals, the only option left is to outsmart the competition.
And with retail investors leaving the marketplace in droves, the only ones left to be outsmarted are other banks. In other words, the cannibalization phase is almost upon us. Which means that just like the Knight Capital "fat finger" led to the collapse of one of the biggest market makers, so more and more banks will soon set their sights on their peers (think Bear and Lehman circa 2008), in an attempt to turbocharge their returns in a field in which there are simply too many competitors for everyone to make the needed returns.

Of course, if in the meantime some lowly attorney general can score some brownie points by amputating a division that is no longer needed, and throwing some janitors in minimum security prison for 12-24 months, so much the better for their political career. Sadly, nobody at the top, certainly nobody at HSBC or any of the other big banks, will ever see true justice, at least not until they too suffer the fate of Dick Fuld and suddenly find themselves as the main dish at the ever shrinking predators' ball.

Funny how manipulation can been sen with Libor but not silver or gold ......

( Ted doesn't get that it isn't that they don't understand , the issue is that the CFTC refuses to act on silver manipulation... ) 


Submitted by Ted Butler:
Recently, I have received a good number of emails containing conversations between readers and CFTC Commissioner Bart Chilton about the allegations of a silver price manipulation because of the large concentrated COMEX short position held by JPMorgan. Chilton had previously led the move to begin the current silver investigation in September 2008 and has always been quick to respond to those writing to him, a rarity for high officials. I couldn’t help but notice that Commissioner Chilton had recently begun to say things that seemed to try to explain away the allegations of a silver manipulation, much different from his former stance of promising to look into it. I found this change disturbing and it has influenced my thinking that the CFTC would never do anything about the silver manipulation. One particular response from Chilton to a reader prompted me to write to the Commissioner myself (aside from sending him all my articles) -
In simple terms, Commissioner Chilton’s response to the reader confirms my worst fear – the reason the CFTC hasn’t moved against the silver manipulation is that they don’t understand it. Even though the agency publishes remarkably detailed and accurate data on concentration in their weekly COT reports, they apparently don’t comprehend what it is they are publishing. As a big believer in the premise that recognition of a problem is 50% of the ultimate solution; I also believe that if a problem is not recognized, it is unlikely to be remedied. I’ve always considered Chilton to be one of the “good guys” at the Commission, so it is quite disheartening to see him so misinterpret his own agency’s data.
This is no small matter. The CFTC’s main mission is to guard against price manipulation, the most serious market crime possible.
Dear Commissioner Chilton,
A reader sent me the following reply from you to him about the short concentration in COMEX silver –
> Hi Tom
> The Commitment of Traders report does not show net positions. So, simply adding all the largest longs up, or looking at one of them, only give you one piece of myriad portfolio. Those reports also don’t give over the counter positions. We look at all of that by trader. While there are a few (at times) traders that have been in excess of what our belated position limits would require, the sizes aren’t like they were a few years back. I saw one trader with 22 percent net short a while back. We obviously look to see what that trader did at volatile times. And, for those that claim they know who the traders are, I’m not sure how they make such determinations. Certainly it isn’t based upon our reports.
> Best,
> B
In all due respect, much of your reply is factually incorrect. Every long form Commitment of Traders report does show net (and gross) positions for every commodity by the 4 and 8 largest traders on both the long and short side of every market. The whole point of your agency keeping concentration data is to insure that no one trader or small group of traders hold such a large net position on a regulated exchange as to manipulate the price. For you to say otherwise is wrong.
While over the counter positions aren’t included in COT data that is beside the point. I am not alleging that the OTC market is manipulating the price of silver; the manipulation is emanating from the concentrated position on the COMEX, a market under your jurisdiction. A concentrated position on the COMEX (the world’s leading silver market) which manipulates the price of silver can’t possibly be excused just because an OTC position may have been created to take advantage of the manipulated price (by the manipulator itself). Nor would it be legitimate for an entity to acquire physical silver after manipulating the price lower via a concentrated short COMEX position. In other words, it doesn’t matter what positions may exist off the exchange, if the position on the exchange is so concentrated as to constitute manipulation.
I don’t know where you have come to learn this incorrect information, but it has clearly prevented you from fulfilling your obligations as a regulator. In the current COT, for positions as of the close of business December 4, the net concentrated short position of the 4 largest traders is listed at 38.1% (versus 11.3% on the long side).
This translates into 54,002 net short contracts held by the 4 largest traders in COMEX silver futures. By the way, since there are over 36,000 contracts listed as spreads in the companion disaggregated COT report that means the true net position of the 4 largest COMEX shorts is more than 51.1% of the market, not 38.1%. This is the largest concentrated net short position in COMEX silver in more than two and a half years.

As I have previously explained in numerous articles that I have sent to you and the other commissioners, your agency disclosed (quite inadvertently) the identity of the biggest COMEX short seller as JPMorgan, in explaining to various lawmakers that the large and sudden increase in the US bank category in COMEX silver futures in the August 2008 Bank Participation was the result of a merger earlier that year that could only have been the JPMorgan takeover of Bear Stearns. I’ll send you a sample copy on request.
Currently, JPMorgan appears to hold 36,500 contracts (of the 54,002 contracts held by the 4 largest traders) on a net basis. After deducting spread positions from total open interest, JPMorgan’s net short position is more than 34.5% of the short side of the market, much greater than the 22% figure a while back referenced in your response.
From your response, it is clear that you are operating on faulty information which may explain why your agency hasn’t intervened in the ongoing silver manipulation. While this is surprising and disappointing at this stage of the manipulation, it also creates the opportunity of setting the record straight should you endeavor to do so. Many citizens and market observers feel your agency has dropped the ball on terminating the silver manipulation. I’m sure you would agree that it is not healthy for so many to doubt our important public regulators and this may present an opportunity to assuage such growing doubts.
Ted Butler

In simple terms, Commissioner Chilton’s response to the reader confirms my worst fear – the reason the CFTC hasn’t moved against the silver manipulation is that they don’t understand it. Even though the agency publishes remarkably detailed and accurate data on concentration in their weekly COT reports, they apparently don’t comprehend what it is they are publishing. As a big believer in the premise that recognition of a problem is 50% of the ultimate solution; I also believe that if a problem is not recognized, it is unlikely to be remedied. I’ve always considered Chilton to be one of the “good guys” at the Commission, so it is quite disheartening to see him so misinterpret his own agency’s data.
This is no small matter. The CFTC’s main mission is to guard against price manipulation, the most serious market crime possible. The reason price manipulation is the most serious market crime is because it distorts the free market, thereby affecting everyone, consumers and producers alike, not just active market participants. The one sure cause of manipulation is a large concentrated position held by one or a few collusive traders. That’s the whole purpose of position limits, namely, to diffuse and prevent concentration. Whether it was the Hunt Bros on the long side of silver in 1980, or the Sumitomo copper trader known as “Mr. 5%” on the long side of copper, or JR Simplot on the short side of Maine Potatoes in 1976, the common denominator of all market manipulations has been the concentrated holdings of one or a few traders. So it is with JPMorgan on the short side of COMEX silver today. What is shocking is that our most important commodity regulator, the CFTC, has seemingly failed to recognize this.
Of course, perhaps it is not that the agency doesn’t understand what is occurring in silver, but more that it doesn’t want to understand. Perhaps there were some guarantees exempting JPMorgan from future charges at the time of the Bear Stearns acquisition. Perhaps JPMorgan and the CME are so powerful and above the law that the CFTC can’t hope to confront them on such a black and white matter of excessive market share concentration. Most remarkable of all is that more market observers have written to the Commission about silver-related matters than the cumulative total of all other issues. Still, the agency doesn’t get it (or want to get it).
What to do about all this? I think the answer may come from none other than the CEO of JPMorgan, Jamie Dimon. Truth be told, were it not for silver, Mr. Dimon would rank high on my list of effective business leaders. I’ve followed his business career with admiration for many years. The best thing about him is that he comes off as a no-nonsense, to the point kind of guy. This morning, in a special broadcast on CNBC, Dimon was a featured speaker at a special conference. He talked about the greatness of America in so many ways and bristled at a suggestion that JPMorgan was too forceful in their dealings with the regulators. Mr. Dimon’s retort was that the Bill of Rights allowed everyone, including JPMorgan, freedom of speech and the right to petition the government. I agree with Mr. Dimon and that has largely been my approach concerning my allegations that it is JPMorgan manipulating the price of silver. As citizens, we all have the right to petition the regulators to move against perceived market crimes. I intend to continue to exercise that right and suggest you do the same. I’d also like to help educate the regulators as well, as far as understanding their own published reports. Lord knows, they could use the help.

funny how there isn't enough silver to sell silver coins until January 7th.....

US Mint Sold Out of Silver Eagle Bullion Coins Until January 7, 2013

Authorized purchasers will be faced with a three week period during which there will be no American Silver Eagle bullion coins available to order from the United States Mint.
The Mint recently informed authorized purchasers that all remaining inventories of 2012-dated Silver Eagle bullion coins had sold out and no additional coins would be struck. Since the 2013-dated coins will not be available to order until January 7, 2013, this leaves a three week void for the Mint's most popular bullion offering.
As with other bullion programs, the US Mint does not sell Silver Eagle bullion coins directly to the public, but distributes them through a network of authorized purchasers. The primary distributors are able to purchase the coins in bulk quantities at a price based on the market price of silver plus a fixed mark up. The coins are then resold to other bullion dealers, coin dealers, and the public.
The US Mint originally began accepting orders for the 2012 Silver Eagles from authorized purchasers on January 3, 2012. After a strong January, monthly sales trailed the levels of the prior year until October when demand started to move higher. In November, bullion sales continued their renewed strength, with sales of American Gold and Silver Eagles more than doubling the figures from the year ago period.
The strong sales in November caused the United States Mint to adjust their production plans for one ounce and one-tenth ounce American Gold Eagle bullion coins in order to avoid selling out prior to the end of the year. Apparently, the Mint did not adjust production plans for American Silver Eagle bullion coins.
Sales figures published on the Mint's website indicate sales of 1,403,000 of the one ounce Silver Eagle bullion coins for the month of December. Year to date sales have reached 33,510,500.

and regarding Comex.......

Comex is rigged, so buy only metal, not paper, Turk tells King World News

6:23p ET Monday, December 17, 2012
Dear Friend of GATA and Gold (and Silver):
GoldMoney founder and GATA consultant James Turk today tells King World News how the big commercial shorts in the gold and silver futures arenas always fleece participants who think there's a market. Turk says the shorts can be beaten but only by avoiding futures and purchasing real metal. "The house is rigged," Turk says. "So don't play the game. Stay out of the paper market. Stop using the Comex. Don't be feedstock for the gold cartel."
An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

and a great podcast......

Earlier this week, I spoke with Alasdair Macleod of GoldMoney. He's written several, extremely valuable articles recently and I thought it would be great if we could hear directly from him. Fortunately, for all of us, he gladly obliged.
The primary focus of our discussion was this great piece that Alasdair posted earlier this week: So that you can look it over while listening, here's a C&P of the entire thing:
Gold futures market heading for crisis

I thought I had a good idea what disasters we might face in 2013, and then I saw the most recent US Commodity Futures Trading Commission’s Bank Participation Report for gold and silver. On the basis of recent BPRs these markets are heading for a crisis, which is generally unexpected. I shall break the reader in gently by looking at gold first.
The first chart below shows US banks’ net short exposure to gold up to December 4. Between February and August the US banks managed to reduce their net shorts from 104,717 to 57,689 contracts against a background of a declining gold price. This is logical, to be expected and sensible position management. However, when the gold price turned up after the August BPR, net shorts rapidly rose to new highs, and over the last month unexpectedly increased again while the gold price actually declined. This is a sign that the US banks, of which only five made returns for December, are having difficulty keeping a lid on the market that emotionally at best is neutral, but most probably somewhat oversold. This differs from an over-bought market with potential profit-takers to shake out, as was the case when gold traded at $1,900 per ounce and the same banks were able to bring the gold price back under control.
The next chart is of Non-US banks’ net shorts, which tells a very different story. From October 2011 these banks increased their short positions, with a sudden jump between August and October, before sharply reducing their net positions to 44,707 contracts this month. It appears that some of the shorts have ended up on the US banks’ books, pushing their shorts to uncomfortable levels as shown in the first chart.
The jump in these net shorts between August and October was comprised of sharp rises in both longs and shorts involving swap dealers and the other commercials. Longs more than tripled from 9,199 to 34,881 and shorts rose even more from 49,772 to 113,445 on a rising gold price. The likely explanation is that buyers materialised through some of these non-US banks, who hedged by buying futures contracts. A dealer or dealers at one or more other non-US banks saw the price go against their shorts and tried to kill it by massive intervention. Subsequently, when the US banks sold the market down from the October rally these non-US banks took the opportunity to reduce their shorts to more normal levels.
This information is particularly revealing, given that the Commitment of Traders Report shows a substantial reduction in the Commercials’ net position by 34,551 contracts for the week to the same date as the BPR, giving an impression of a market being brought back under control. The BPR suggests otherwise.
While there is a large stock of gold that can theoretically become available at higher prices, the same cannot be said for silver. We shall look at the position of the US banks first. The first silver chart shows that even though silver is trading well below its 2011 highs, US banks’ net shorts are substantially higher than might be expected. The long figure is down to only 625 contracts, while the shorts are 40,198, so these less-than-four-banks that reported last week have a net short exposure of nearly 200,000,000 ounces, or twice the estimated annual supply of silver available to investors after industrial demand is allowed for.
The final chart shows the non-US banks’ net shorts. Unlike their exposure to gold, these banks are in the same deep trouble as the US banks, having made the mistake of turning a broadly level book as recently as the August BPR into a record net short position on the August-October price rise. This is a vicious bear squeeze on them, which added to the US banks’ position amounts to a total short of 290,000,000 ounces. This figure compares with net shorts of only 120,000,000 ounces when the price was successfully taken down from its all-time highs early last year.
The silver does not exist to cover these short positions, and it will take very little further buying to set off a crisis in this important market. In the case of gold, there have always been central banks with physical bullion available to ease market shortages, but so far as we are aware the strategic silver stockpiles of previous decades are exhausted. There is therefore no price at which these shorts can be closed.
Bank positions in both silver and gold seem to have been adversely affected by “events unknown” from the August BPR onwards. All attempts by the banking community to regain control of these important markets appear to have failed.
Since the date of the latest BPR (December 4), there have been three serious attempts to reduce these short positions and each time the same $32.60 level has held firm. This suggests that a buyer or buyers larger than the banks are prepared to take them on by buying the dips. This price action supports anecdotal evidence that physical bullion in important markets such as London is in short supply.
On this evidence, and assuming the trend continues, there will shortly come a time where NYMEX will be forced to declare force majeure in this market, which they can do under their rule book. The consequences of this extreme action could well be destabilising not only for the price and demand for silver but also disruptive for gold.Therefore, we must add the breakdown of precious metals markets to the list of systemic dangers we face in the New Year.
Finally, following the podcast, you should take a few minutes to review some of the other, enlightening articles that Alasdair has written lately:

1 comment:

  1. Check this. Very interesting .....

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