Inquiry Into Monopolistic Trading Practices By JPMorgan On LME Launched, Sending PMs Higher

Tyler Durden's picture

Some interesting headlines just hit Reuters:

  • UK GOVT COMMITTEE SAYS IT BRINGS ACTIVITIES OF LARGE DEALERS ON  LONDON METAL EXCHANGE TO ATTENTION OF OFFICE OF FAIR TRADING
  • UK GOVT COMMITTEE SAYS 4 LARGE COMPANIES OWN LME-REGISTERED  WAREHOUSES, CALLS THAT “RESTRICTVE”
  • UK COMMITTEE NAMES JPMORGAN <JPM.N>, OWNER OF WAREHOUSER HENRY  BATH, AS ONE OF THOSE 4 COMPANIES
  • UK COMMITTEE SAYS WOULD BE CONCERNED IF OWNERSHIP OF WAREHOUSES  BY DOMINANT DEALER ON LME WAS ANTICOMPETITIVE
  • LME SAYS MINOR METALS TRADE ASSOC. ASSERTION TO UK PARLIAMENT ON  METALS WAREHOUSING IS “UNJUSTIFIED AND COMPLETELY OUT OF CONTEXT

As further clarification, our colleagues at the FT's blog Alphaville point out the following findings about JPM's dominance of the LME which apparently has pissed off at least one local committee (since the CFTC can not be bothered to complete its investigation of JPM precious metals manipulation).

MARKET DOMINANCE

79. We heard that there were large companies dealing metals within the UK and an allegation was made by the MMTA that a company through a subsidiary may be behaving in an anti-competitive manner: on the London Metal Exchange there are four very large companies that own the very warehouses that people deliver metal into, J.P. Morgan is one of them.

They own a company called Henry Bath. They are, therefore, a ring-dealing member of the exchange and they also own the warehouse. That is restrictive. They were also reported, at one point, to have had 50% of the stock of the metal on the London Metal Exchange.[113]

80. We would be concerned if the ownership of metals storage warehouses by a dominant dealer on the London Metals Exchange were to be anti-competitive. We would also be concerned if a dealer who had the resources to own over 50% of stock on the London Metals Exchange impeded the correct functioning of the market.

81. We use this report to bring the alleged activities of large dealers on the London Metals Exchange to the attention of the Office of Fair Trading. We would be concerned if a dealer were undermining the effective functioning of the market and we look for assurance that the market is functioning satisfactorily.

And another big oops for Blythe Masters who apparently has decided to move now officially investigated market manipulation practices to London and away from the CFTC. In the meantime, silver Comex holdings continue to decline and at last check, are flirting with the record low 100 million ounce level. Once can only imagine (literally) what is concurrently happening at the LME and/or LBMA. (But neither of these is currently an issue, supposedly, once again courtesy of our colleagues at the FT).

Regardless, here's silver, which appears poised to resume the trek higher.

h/t Victor