Another Exchange Halts Levered OTC Gold And Silver Trading

Tyler Durden's picture

Last week it was, now it is Oanda. As a reminder ", a large retail foreign-exchange operation, on Friday told clients it will discontinue its gold and silver over-the-counter products marketed to retail investors who are U.S. residents. It asked investors to close their positions by July 15." This was first reported on Zero Hedge. "Trading gold and silver over the counter -- bypassing a futures exchange -- offered investors a chance to enter a highly speculative, leveraged market that also left many investors at risk of fraud, according to one trade group. “In order to trade, it needs to be done in a exchange, or it can’t be done at all,” said Dan Driscoll, a vice president with the National Futures Association. The industry group asked Congress for such changes, due to numerous cases of fraud in such contracts. Doing business with a futures exchange offers retail investors more protections and transparency, he said." There you go: it's the extensive fraud that did it. And just as we predicted, this is only the beginning to heard all PM investors into the waiting clutches of the CME's margin demands.

And now more and more are protecting from "fraud exposure."Starting with Oanda.



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carbonmutant's picture

The final solution lies at the end of a cattle chute...

DoChenRollingBearing's picture

unless you buy physical gold and stay off the radar.  Guns & ammo may help too.

And don't wait around, things could change quickly...

RockyRacoon's picture

Futures oughta be for the end users, not gamblers.   If you ain't in an industry that requires PMs for fabrication, or a jeweler/flatware maker, GTFO!   Where do the miners fit in?   That's another situation that has been addressed already.

nonclaim's picture

While this is correct and can be implemented by requiring futures traders (direct or on behalf) to register and limit accounts to a reasonable amount (capacity for taking delivery) nothing prevents the creation of other derivative instruments that explicitly says no good will ever be delivered, all cash settled. The party can then go on.

jeff montanye's picture

and does this not apply just to "retail" investors?  large speculators are not affected, correct?

nonclaim's picture

When are large speculators affected? /sarc

I was addressing the creation of an instrument to fit the purpose of speculation, not large vs retail. But you bring up another point: if there is a major market dislocation (unexpected, of course) and either a large retail mass is unable to meet margin calls or the retail shop itself that borrowed shares from somewhere else on margin, the shops that provided/operated unsafe levels of leverage may be affected to the point of bankruptcy, and they are not TBTF. While the total amount may not be large the number of people affected would be huge and likely create a mass hysteria.

These are my thoughts; I doubt TPTB share my concerns on the "small people".

tmosley's picture

Speculators do serve a legitimate role in the futures markets, but they should be forced to provide their own leverage (ie via an off-exchange loan) so that it becomes difficult or impossible for market manipulators to operate (ie they can't see how levered people are, and there is no specific level where there are a lot of people that can be knocked out of their positions).

Marlon Brando's picture

+1,000,000,000,000,000,000,000 I had to add some zero's to account for hyper inflation.


slow_roast's picture

Wonder how much Comex paid for the privilege of having business funneled to them.

Harlequin001's picture

and of course, the exchanges are not fraudulent at all, are they?

The government is lying to you and this is where you must be lied to, by law...

Just buy the real stuff and be done with these people.

twinshot's picture

Tyler, SHIBOR just posted today's fixings and as predicted it is not pretty. 1W and 2W are up over 9%

chump666's picture

HSBC PMI came in close to going under 50...pre waring was SHIBOR, and i am willing to bet (am actually) that spreads blow out on the LIBOR etc within days of the Greek austerity vote.


qussl3's picture

Superman Stevens is shitting his pants right now.

ONEPurpose's picture

We are Anonymous.

We have read your financial boards.
Your financial boards make 'sense.'

We have noticed you are missing things.
You don't notice, do you?

You have become part of the problem.
you write. People listen.

Jp morgan manipulates markets.
As do you, unwittingly. Who do you serve?

As are we, cunningly.

Silver Viral Project.

It is here.
Google it.

Down with Fiat.
Expect us.


Ranger4564's picture

I for one will support the underground movement.  It's time for civil disobedience, before things become more uncivilized.  I own gold and predominantly silver... 1:100 ratio basically.  75% or more of my holdings are in Silver / Gold.  I firmly believe the metals are the least desrtuctive place to store wealth.  Let's go Viral. :)

zorba THE GREEK's picture

 sure, this makes sense. To protect us from fraud we have to trade

 through the Comex. No fraud going on over at the Comex [ home of

 the mother of all frauds ]  I think I'll just keep buying physical. 

chump666's picture

No big deal.

Japan start of the year capped their feverish Ms Wantabes 50:1 leverage on FX...

For a retail investor trading on margin, forget it you need a 30:1 to make any real cash. Most retail investors don't have much cash anyways.  I suspect the option market will be relevantly untouched.  Just watch when the hedge funds (that have been running losses since the Bernanke's bull market) start to short all indexes.  Ride a put down with the 3-6mth market collapse/liquidity/HUGE margin close now.



GittyUP's picture

Hopefully they not only crack down on PM sales by these f'ing bucket shops but should shut them down for currency trading as well.  These companies are literaly scams for retail traders on the spreads on FX.  Im pretty sure they arent regulated in anyway.  Only an idiot would trade with them and sometimes its actually right to stand up and protect idiots from themselves. 


I doubt this has any impact on the market because there cant be much $$ trading PM's thought these jokes.  Any serious trader with real money would know better. 

HungrySeagull's picture

Whoa there horsey!

PM sales and buying continues as before. It's the "Paper Shares" that will be closed down.

Harlequin001's picture

and do you think trading through these exchanges will provide you any protection whatsoever?

You have become cannon fodder for the big boys...

unless you walk and buy physical.

uptofreedom's picture

FU Dodd.  FU Frank.  Both of youse can eat shit.

Element's picture

due to numerous cases of fraud in such contracts.


"At this juncture . . . the impact on the broader economy and financial markets of the problems in the OTC Precious Metals markets seems likely to be contained," - Ben Bernanke


See, all good.

Korg's picture

JULY 15th.....After that the PM market will enter rocket mode. So nice of the bankers to notify us....

dwdollar's picture

How nice.  Now the fraud will be centralized.  Good job Daniel A. Driscoll!  You have limitless foresight.  Like so many from your generation.

The Aviator's picture

I'm with you OnePurpose.  I've been doing everything I can to promote the Silver Viral Project. Tyler asked me to stop sharing links to it though. Not sure why, as the message of silver obviously needs to reach the masses.

Ranger4564's picture

I'm with you OnePurpose and The Avaitor, at least in this regard.  I don't know your posting history, but with regards to creating some sort of disturbance to the mainstream control mechanism, everyone must engage in a small act, to remind these fuckers that we're people and won't lie low for ever.  Hopefully they get the subtle message now.   I sincerely doubt it and completely expect the citizenry will be required to explode into a real massive throng globally, including the needless death and suffering of a portion of the broader populace, for no reason, only to impress on these a-holes that they cannot be allowed to win. 

For the reading impaired...

I'm not threatening the general populace, I'm saying TPTB will resort to real force, like they have in Libya, and elsewhere, to suppress any protests, large or small, and the only way we have any chance of overcoming TPTB is to lay our lives down for the cause.  I cannot see the current course changing otherwise.  We are at war, but the mass of citizenry thinks delusionally that they're being protected by TPTB, and in fact work against their saviors, the outcast disobedient civilians.  Eventually, everyone will recognize which side they really land on... the side of the protesters, and we will then have a hell of a party on Earth... the whole planet will be involved in protests / uprisings / distress.

I would have hoped we could have avoided this, but it's not possible any longer, not after we allowed the Bailouts to pass without even a whimper, not after we allowed the outright invasion and overthrow of the Middle East, the sacking of South East Asia, the occupation of Africa, the marginalization of South America... too fucking late.  Eventually, the day will come when people have had enough.  And on that day, many may look upon Europeans / Americans with some disgust.



orkoSvalbard's picture

This was on ZH a while ago, but I haven't seen follow up.  The "check in to sell your PMs" law passed here in Washington, to be effective next month:

I had noted previously that the delegates responsible for proposing this bill are from districts adjacent to the Northwest Territorial Mint, which is basically the retail location at which we purchase PMs around here.  Just wondering if anyone has thoughts on whether or not this was a "test market" for such laws, and if other states will follow suit?

Harlequin001's picture

since when does any government shut down any market because there 'might' be fraud?

That said, the sooner long paper is gone the sooner pure physical buying can step up. That can't be as easily manipulated by government because anyone can buy physical anywhere through a non resident trust. At that point the price will be unstoppable.

It would be funny if it wasn't so sad...

XenoFrog's picture

It's all about creating a database of gold/silver buyers/sellers. They said it was intended to help the people from these shady dealers, but it requires a very 'touched' mind to think that giving massive amounts of personal information to the same people the state has identified as 'shady' will help anyone. I'm sure they're already drafting another bill to deal with the massive amount of identity theft that will result from the first bill.


Ranger4564's picture

Good point re the shady characterization and personal information.

Ranger4564's picture

I read through the law fairly quickly, and although onerous in that it requires the seller to record my id number / name / address / height / weight / all sorts of miscellani, the law does not seem to suggest that these records be submitted to any particular authority... maybe I missed it in my quick read... the law requires these records be kept for 3 years.  So if you sell me some metal in a second hand market, you keep the records for 3 years, I may also be required to keep some information on the transaction as the buyer... and after 3 years, we can toss the records.  Essentially a statute of limitations on any claims of fraud.


What I don't know the impact of is the fact that the classification of "second hand dealers" is very broad... covers everyone who sells any kind of property governed by the law. 


The part that concerns me is the privilege granted to the government / police to know about these transactions, and the authority to investigate any merchandise / sale, and so on. What's to say if the government is broke, they don't write a law allowing them to come grab the property from the sellers and the purchasers each?

Tapeworm's picture

ZH and other sites have published the language in the FX contracts that these bucket shops offer. Most of them get the crient to sign on the dotted line that the operator of the FX shop can and will trade against the interests of their soon to be fleeced clients. The langusge outlines that the client will be actively traded against and that they have no recourse against the shop that sets up all trades to th house advantage.

 I can see no reason to attribute some sinister motives to the regulating agencies that are trying to keep dumb retail gamblers from getting totally screwed by these maggots.

Harlequin001's picture

'dumb retail gamblers' need to learn about due diligence which starts with reading the contract.

'I can see no reason to attribute some sinister motives to the regulating agencies that are trying to keep dumb retail gamblers from getting totally screwed by these maggots.' I do, it's called personal freedom to do as I please.

I read the contracts and then stay the hell away from these people. If you're stupid enough to buy this then you deserve to lose your money. Investors need to learn that responsibility for investments should rest with the individual investor, not with a nanny state that guides everyone to 9% pa whether you like it or not through a stock market or bullshit bond fund 'managers' who can't see past the letters 'AAA".

But then that's the problem with a gold standard isn't it? With gold in money you are under no pressure whatsoever to invest your money with these people. under a gold standard, who needs regulators or exchanges? If you aren't totally satisfied with the response you get from the manager then you simply don't invest your money. Under this system these fund managers don't need to answer any dd question because there is simply too much dumb money floating around that doesn't ask questions.

That's why I buy gold, because until someone does start to answer my questions I have no risk whatsoever with my investments...

Tapeworm's picture

What if the heap of these forex/gold/silver contracts are nothing more than a scam at the most basic level. Doesn't the goomint have some responsibility to eradicate the scams so that they do not end up clogging the court system?

 What you say is ok if you think that it is just dandy to allow this type of scam. It bothers me that the rest of us have to provide a very expensive venue to entertain lawsuits.

 If it was all up front and stated so that the sucker customer cannot use the taxcow funded courts to sue the guys that fleeced the buyer of the bogus contracts, I wouldn't have much problem with allowing the suckers to be gutted. It is not that way at all. We taxcows are forced at gunpoint to provide a vastly expensive playpen for fraud suits.

 You claim that you want the free market to find the value of this crap. I'm ok with that just as long as all participants know that they cannot appeal or arbitrate this gambling in the taxcow financed court rackets.

Harlequin001's picture

Tapeworm, you combine two very valid points, one being the integrity of market participants and the other being the cost of legal recovery and who pays for it.They are not the same neither should they be related and certainly not the responsibility of taxpayers, which is what I believe you are saying here.

My view is that with gold in money we don't need any regulation because I have no NEED to invest and am therefore in no rush. I would rather see no regulation and let common sense and proper due diligence prevail because I can invest my money where I choose. As things stand today I can't even hear about many investments thanks to government attempts to regulate and close down unapproved markets and investment schemes.

Can you think of any good reason why you should not be able to even hear about a good Australian of French investment opportunity if you wanted to, or why any Australian shouldn't be able to hear about your offer if you had one?

Once there is more (or even some) fear in investors then maybe some sanity will return to financial markets and governments won't have the ability to bail out these banker types. Once the value of money is stabilised and I have no need to invest at all then these scams will find it very difficult to attract money and exist at all, maybe we will have an investing public that actually demands information from these so called 'managers' before losing their cash.

There was a time once when you had to know what you were doing to make money. It was the reason why we employed managers to manage our investments. Now all you need do is buy a house and let the government do the rest, and as the saying goes'a fool and his money are easily parted...'


Ranger4564's picture

The reason you are being forced to endure a Government at all is because the vast majority of people decided a long time ago that they do not wish to police the criminals / unscrupulous themselves.  As a consequece, you are burdened by regulations and restrictions which facilitate the desires of the majority.  Your best recourse is not to protest the fact that the government exists at the behest of the majority, but to protest the actual laws that are being enacted, because you view them as unnecessary encroachment.  You may have come to the conclusion that all laws are unnecessarily burdensome, but I wish you good luck in convincing people to arm themselves, as all laws are removed, and you restore sanity to the world. 


I agree that a lot of laws are passed which are detrimenal to the citizenry...and the government has been overtaken by the financiers, but I see that as a call to figure out how to establish a government that is not as prone to corruption.  Same as the founding farthers supposedly did, in constructing the 3 part government we have.  Maybe it is not possible, and we have to live ungoverned, amorally, segregated so as to cause little affrontery.

Tapeworm's picture

Back in 1999-2002 when glod was making a double bottom and then rising rather well, many paper players got completely wiped out to their last penny in these contracts.It was not from physical holdings, but from the shit that telemarketers at MONEX and other shops sold to the unwitting. Even though they were long what they thought were fairly simple levered contracts(4:1 max) and the PM was going up, they lost all of their poke. Many of the bucket shops plainly said in the fine print that they had complete control over just what time of the day that the executed trades would be date stamped. Of course it always went against the customer for the worst trade  points of daily or weekly--- depending on the wording of eache shop's contract.

 These people are filth. It has Zero to do with manipulation of the overall metal market and everything to do with stripping of their client base.


 There was a guy on the old Kitco site by the handle of "Stradmaster". He was a concert violinist and seemingly as fine a person as you would want to meet. He got taken for hundreds of thousands by the guys that he "hired". He was wiped out being long on light leverage in a fairly strongly uptrending market. If he had done it on COMEX he would have made out well rather than losing all to the scammers.

ffart's picture

I used OANDA to trade spot silver for about a year. OANDA's minimum size to open spot silver position was 1oz. Minimum position to open a futures contract is 1000oz. And with OANDA you can leverage yourself anywhere from 0.0001:1 up to 50:1. No wonder the CME needed regulation to squash OTC futures trading, their product is shit.

Yen Cross's picture

 +1 FFart. Oanda is a reputable trading firm! This tool tapeworm is just a meat ball broker, that thinks he knows how to trade!

dogbreath's picture

I've been in europe for the last two weeks and everywhere I've gone there are shop looking to buy dental gold, scrap jewelery and bullion.  I mean everywhere.   Sombody's buying up the stuff.  Smells desparate.

Treason Season's picture

Care to care names names, mon ami? Any

particular cities and/or shops  paying over 

spot?   TIA


Yen Cross's picture

 hey tapeworm and harlequin! Doesn't the CFTC guarantee those retail investors? After all, that was the precipus behind the Duck Frankenfurter act?  This is nothing more than market manipulation!   Thank GOD I have off shore accounts and can Hedge, and trade Cash for deliveries!   The CFTC and NFA are ASS CLOWNS!  Even with the cme requirement you are looking @ 4-5:1 margin.

Harlequin001's picture

Yen cross, If they do they shouldn't. What right do they or any other regulator have to underwrite any one's investment with my our your money? None.

Why should I pay so that any other dumb ass can blindly put his money in an investment such as deposits without doing any DD or incurring any risk?

I, like you, have offshore accounts and can do as I please principally because I don't live in my home country.


Yen Cross's picture

 I have already checked with oanda, and there is nothing on their website or in any releases that indicate this. I think it's bogus!  Every other country has CFD's available. The retail market is a small fraction of the overall market. You know that. It's a bunch of BS. I agree with the DD aspect, but any tool that doesn't do DD is gonna get margined out real fast!

MrBoompi's picture

I have to laugh when they mention "fraud" without doing anything about the fact the price of paper metal still determines the price of actual metal. And of course everything is getting blamed on Dodd-Frank, which is turning out to be more trouble than it was ever worth, worse than worthless.

There are two kinds of PM investors, these people who deal in leverage and paper, and the people who buy and store real gold and silver. We need separate prices for each investor.