JPMorgan Just Cornered The Commodity Derivative Market, And This Time There Is Proof

Tyler Durden's picture

For years there had been speculation, rumor and hearsay that JPM had cornered the US commodities market. Now, finally, we have documented proof.

* * *

Traditionally, we look at the OCC's Quarterly Bank Report on derivatives activities to see which was the largest bank in the US in terms of total notional derivative holdings. The reason being that like on frequent occasions in the past, we find some stunning  results, such as most recently in January when we wrote that, for the first time, Citigroup had eclipsed JPM as the largest US bank in total derivatives, with just over $70 trillion compared to perennial megabank JPM's $65.3 trillion as of the third quarter of 2014, explaining also why Citigroup had drafted the Swaps push out language in the Omnibus Bill.


And while this time there was little exciting to report at the consolidated level (JPM overtook Citi in Q4 only for Citi to once again become the world's largest bank in total derivatives with $56.6 trillion compared to $56.2 trillion for JPM and $52 trillion for Goldman as Bloomberg reported earlier), and in fact total notional derivatives tumbled from $220.4 trillion in Q4 to $203.1 trillion in Q1 the lowest level since 2008... 

... an absolutely shocking blockbuster emerges when looking at the underlying component data.

Presenting Exhibit 12: Notional Amounts of Commodity Contracts by Maturity: even a CFTC regulator would be able to spot the outlier charted below.


What the chart above shows is that after fluctuating around the low to mid $200 billion range for the past 5 years, in Q1 the amount of Commodities with a maturity of under 1 year exploded to a record $3.9 trillion!

Sadly, the OCC provides no actual explanation for why there was such an epic surge in commodity derivatives within the US banking system in the first quarter, so we decided to explore.

What we found is what those who have for years accused JPM of cornering the commodity markets, have known: because it is none other than JPMorgan's Commodity derivative book primarily in the <1 maturity bucket, which exploded from just $131 billion to a gargantuan and never before seen $3.8 trillion!

In fact as the chart below shows, while historically JPM has accounted for just over 50% of total commodity holdings among all US commercial banks, in the Q1 this number soared to a stratospheric 96% which by anybody's standards is the very definition of cornering the market!


We don't know what prompted JPM's derivative book to soar to such a never before seen amount, but the number most certainly looks abnormal on both an absolute and a relative basis, especially considering that no other banks boosted their particular derivative book with the same vigor.

So what is going on here?

We decided to dig down some more when we encountered something even more perplexing. Because whereas in previous quarterly updates, the OCC broke out the FX and Gold categories as separate derivative items as seen in this most recent chart from the Q4 update...

... in Q1, once again quite inexplicably, the OCC decided to lump these two products together, thus making any credible observation about the total notional outstanding of just gold derivatives, impossible! But wait, we thought that according to former Chairman Bernanke, gold anything but currency: is the OCC suddenly disagreeing with that assessment?


Furthermore, while in all previous iterations of the OCC's Table 9, gold derivative notionals by maturity were explicitly broken out as can be seen in this Q4, 2014 table below:


Starting in Q1, 2015 the "gold" section in Table 9 no longer exists (although we can see that while JPM cornered "commodities", it was Citi that had its total derivative notional of "precious metals" undergo a massive jump, also for reasons unknown).

One would almost think the OCC is hiding something as the demand of US commercial banks. So while we no longer know what just total gold derivatives outstanding is, for some unexplained, reason, we do know that the combined total of FX and gold just hit an all time high.

* * *

And while the OCC did all it could to mask the "gold" line item by lumping it with FX, it still kept "Precious Metals" as is, although we assume that this too will be lumped with FX and gold shortly.

It is this chart that shows something is truly odd when it comes to the US commercial bank industry's activity in the precious metals space.


So in summary, this is what we do know:

  • in Q1, JPM cornered the commodity derivative market, with a total derivative exposure of just over of $4 trillion, an increase ot 1,691% from just $226 billion in one quarter!

What we don't know is:

  • why did the OCC decide to effectively eliminate its gold derivative breakdown by lumping it with FX,
  • why there was a 237% increase in the total amount of precious metals (which include gold) contracts in the quarter, from $22.4 billion to $75.6 billion

We have sent an email requesting much needed clarification from the Office of the Currency Comptroller, although we are not holding our breath.

Source: OCC’s Quarterly Report on Bank Trading and Derivatives Activities  First Quarter 2015

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tonystarks's picture

It's a good time to hedge risk markets with physical assets.


Puerto Rico is another disaster:


wee-weed up's picture



This illegal activity will certainly be dealt with promptly and severely now that JPM just hired a new "Chief Compliance Officer."

Oh wait... the new hire is Eric Holder!

Pinto Currency's picture



If JPM are net short, they may be cornered as oposed to having cornered the market.

ThirteenthFloor's picture

Pinto what sane person would sit on 65-70 trillion USD of anything, unless destruction was the goal. Give it a sane thought for one moment, this is more proof of psychotic NWO than anything else, QE, endless war, political manipulation.

Save_America1st's picture

but we still don't know if 'ol uncle Ted Butler is correct or not in his theory that JPM has bought up all the phyzz silver supply of Eagles w/ free fiat from the Fed.

Only time will tell...and I don't think there's much time left, do you folks???

Don't wait...just keep on stackin' phyzz for as long as these scumbags keep hammering the paper dollar price down way below the cost of production. 

It's a no brainer


Save_America1st's picture
Silver Squelchers SIXTEEN & Their Interesting Associates

[Note: #16 in the incredible Silver Squelchers research series is 119 pages long. It’s essentially an entire book of its own, offered for FREE to SGT Report readers, courtesy of the one and only Charles Savoie. Please PRINT THESE OUT and save them! ~SGT]

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“Founded in 1902 in London and the following year in New York, the Pilgrims Society seeks to promote good Anglo-American relations. It has an elite membership of politicians, diplomats, businessmen, and writers.” Most of their identities must be kept unknown to “promote good Anglo-American relations?” We are reminded of Samuel Johnsons (1709-1784) warning, “Where secrecy or mystery begins, vice or roguery are not far off.”


From The Pilgrims 1940 roster, JFK’s father—


El Vaquero's picture

Um, how much margin debt is involved here?  Commodities often allow for 5%-10% margins.  This could really assfuck JPM if something moves the wrong way.

SafelyGraze's picture

articles like this demonstrate why it is bad and wrong for reports to be released to the public

Wait What's picture

wasn't Tyler also the guy who leaked the London Whale position that immediately led to its implosion?

that's the rumor i heard.

London Whale 2.0?

SumTing Wong's picture

Where have you gone, Bunker Hunt? They would have already reamed him way before this point.

Dutti's picture

Is JPM possibly doing God's work for the central banks? After all they supposedly hold huge amounts of physical gold and also have printing presses to pay for any amount of short positions.


Four chan's picture

obozo could ask his fellow clowns what is going on...LOL YEAH RIGHT!

The bank chiefs are in Washington for a regular meeting of
the Financial Services Forum, a Washington trade group that is
made up of the chief executives of 19 of the biggest financial
services firms.

Here is a list of the chief executives scheduled to meet
with Obama:

- Lloyd Blankfein, Chairman and CEO, Goldman Sachs 
- Jacques Brand, CEO, Deutsche Bank Americas 
- Michael Corbat, CEO, Citigroup 
- Jamie Dimon, Chairman of the Board, CEO and President, JP
Morgan Chase 
- Sergio Ermotti, CEO, UBS 
- James Gorman, Chairman and CEO, Morgan Stanley 
- Gerald Hassell, Chairman and CEO, The Bank of New York Mellon
- Jay Hooley, Chairman, President and CEO, State Street
- Abby Johnson, President, Fidelity Financial Services, Fidelity
- Steve Kandarian, Chairman of the Board, President and CEO,
- Brian Moynihan, President and CEO, Bank of America 
- John Strangfeld, CEO, Prudential 
- John Stumpf, Chairman, President and CEO, Wells Fargo 
- Jim Weddle, Managing Partner, Edward Jones 
- Bob Benmosche, President and CEO, AIG

the kings whore's picture

Eric Holder just got hired?  You got to hand it to the bankers.  They know where their bread is buttered and vice versa.

strannick's picture

So JPM shorted the shit out of gold to keep the price down, and half assedly covered their tracks by pretending they were selling commods in general?

Ergo, Buy gold?

messymerry's picture

Yes, a blatant example of the evil trinity in action.  There is no longer even a revolving door.  There is no door at all.  The lanes between the Corporations, the State, and the Mammonites* are wide open.  In fact they are morphing into a single entity. 

*Mammonites is an all inclusive term for what were in biblical times, the Moneychangers.  Today they have insinuated themselves into all aspects of financial activities.  Starting with the Central Bankers, we go to the major financial houses, the smaller brokers, insurance companies, and charlatans. 

We are being eaten alive by this soulless psychopathic parasitic evil trinity.   This time IS different.  The advent of the information age has rewritten all the rules of engagement.  When this all blows up, it's going to visible on the moons of Saturn. 

Gird yourselves ZHers,


dontgoforit's picture

No one is responsible now.

fiftybagger's picture

21 Though hand join in hand, the wicked shall not be unpunished:

Proverbs 11 King James Bible

sharkbait's picture

vice versa?  where their butter is...breaded?

ptolemy_newit's picture

very dangerous to expose these important men in one room, who would ever dream for such an oportunity?

Whoa Dammit's picture

The head of JPM's commodities desk must be too young to have heard of the Hunt Brothers. 

SofaPapa's picture

"This could really assfuck JPM if something moves the wrong way."

I know very little about how high finance works, and the derivative world is way above my pay grade.

But if JPM has truly cornered the market, is it in fact possible for it to move against them?  What does it mean to corner a market if it doesn't mean that they now entirely control it?  This is an honest question.  I don't understand the terminology well enough.

FireBrander's picture


Asking irrational people rational questions is a waste of time.

When the price moves against the Rightwingnuts positions; it's because JPM controls the market.

When the price moves in their favor; JPM? What are you talking about? Gold is going to $10,000!

Occident Mortal's picture

It's impossible to exit such a position without the market running away from you.

If you own 96% of an instrument how do you sell 96% of it without crashing the market?

If you have short sold 96% of an instrument how do you cover that short without bidding the price into a huge spike?

If you corner a market you can generally control the price until people figure out that someone has cornered the market. When word gets out, everyone else in the universe conspires to squeeze your balls and the market runs away from you and you get margined out and everyone else makes a killing at your expense.

HungryPorkChop's picture

@Occidental Mortal : That might be true if you didn't have a CTRL ALT PRINT button to get all the cash you wanted plus mysterious unnamed dark pools that will come in and buy up any junk that you need to dump at a huge loss.  It's rigged from the start all the way to the bloody finish.

Transformer's picture

OcciMort, you ae just looking at trading.  With a reset, silver could be as vauable as gold, there is certainly less silver than gold on the planet.  I don't think they plan to sell and make a killing.  They are holding through the reset, when who knows what could happen on the other side.


zhandax's picture

Tf, those are derivatives under one year.  If they are holding through the reset, they must be expecting said reset imminently.  I think an easier theory to envision could be that the bulk are options or swap positions they sold which, assuming they can hold the underlying metal price down, will expire worthless, allowing JPM to keep the premiums.

BadDog's picture

We don't need no stikin badges, we're the Exchange Stabilization Fund!

Gent's picture

Cornering the market is great fun...until someone sledgehammer's your balls into a sticky paste.

El Vaquero's picture

Aside from somebody else trying to squeeze their nuts off, they're tied to physical goods.  What happens if some new mutant corn worm is immune to the toxin in the BT corn and decimates the corn crop this year?  Or, what happens if they have a record corn crop and JPM holds a lot of shorts in corn?  What happens if a bunch of mining companies go tits up? 

chunga's picture

I often see ZH get critcized for blaming everything bad on bankers.

Let's see if I've got this right.

Eric Holder works for the law firm that gave the green light for MERS, the secret electronic mortgage society that enabled selling peoples' home as Wall Street certificates then becomes US aTtorney gEneral. DOJ finds not one ounce of wrongdoing whie millions get froeclosed.

That entire bubble, inflated by fEd chairman Greenspan pops, resulting in huge TARP bailouts for reckless bankers.

New fEd banker Bernake dreams up fake QE money ~80B/month and hands it to his banking buddies to buy all the shittyMBS deals.

Now Tyler tells us that it looks like the "Office of the Comptroller of Currency*" (LOL!) conspires with JPM to cover up another huge pile of steaming fraud with Eric HOlder presently employed at JPM to the tune of 77 million doollars. (<--is that real or a joke?)

* OCC Mission Statement: "To ensure that national banks and federal savings associations operate in a safe and sound manner, provide fair access to financial services, treat customers fairly, and comply with applicable laws and regulations"


papaclop's picture

I hope JP Morgan gets what they deserve:  good and hard.

HowdyDoody's picture

" This could really assfuck JPM if something moves the wrong way"

Is there a downside to this?


Oracle of Kypseli's picture

What if.....JPM is the banker of all bets on the online 24 hour gold and silver in all fx trading platforms.

JPM then sells huge number of contracts in either direction and sweeps all stops on the way dn and on the way up as these stops are based on your leverage and the action ratio of your funding in play.

Bingo. It's as if the players are going all in and you can cover everyone and everytime, eventually every player is broke.

With unlimited digital money nobody escapes. 

That's why you see a big drop only to be followes by a smooth reversal

BaBaBouy's picture

RIGHT ON... They Just Eat All The Positions On Both Sides, Up/Down. Always Profit.

fiftybagger's picture

Anybody dumb enough to still be buying paper metals deserves what is coming.

Silver For The People

Pinto Currency's picture



The derivatives market is a mess.

They may have long and short postions in gold and silver in an effort to contain the market for a period (perhaps while they exit their less attractive positions in interest rate sensitve derivatives).

Tough to say exactly what is up with this report - but the size seems to indicate a problem.

seataka's picture

As each contract requires some cash up front, perhaps, just perhaps, this is a 'color of law' method to infuse the Comex with cash, in order to keep the COMEX itself from failing?

To prepare the comex for extraordinary price moves and prevent a liquidity crunch in commodities? LIKE the recent mutual fund and ETF loan agreements, but in camo.

I dont know finance other than it is an elaborate fraud in general, I do know the arts of deception.

If JPM were to directly infuse the Comex with a tranch of cash... people would ask: WTF?

philipat's picture

Would that information on the detail not be available under a FOIA request? Unlike The Fed, OCC cannot use the excuse that "It is a Private Corporation not a Government entity"....

And incidentally Tyler, whilst the remaining PM information IS still available, it might be a good time to run the numbers comparing the total notional PM derivatives exposure to the the notional exposure as reported in the Monthly BPR? That might throw some additional light on the total notional value of PM derivatives OUTSIDE LBMA/Comex contracts, which appers to be huge?

wee-weed up's picture

I'm sure Eric Holder (who is an expert at delaying and otherwise obfuscating FOIAs) will just call the head of OCC and offer him a few "pointers."

ZD1's picture

Holder will serve as JPMorgan Chase’s chief compliance officer, where his responsibilities will include lobbying Congress on the company’s behalf and ensuring it “gets the best deal possible” from any new proposed financial regulations.

For his efforts, Holder will earn an annual salary of $77 million plus bonuses for a job well done.

wee-weed up's picture

Yep, Obozo's Crony Capitalism is advanced to the max, whilst pleasing & enabling his Wall Street puppet-masters also to the max. A Win-Win  for the forces against freedom.

FireBrander's picture

I thought Obama was a Liberal and this is all the result of failed Liberalism running out of other people's money?

So now Obama is a Capitalist? Or a Capitalist Tool? The latter I can believe...

Funny how the only person with enough balls to actually do what all you Rightwingnuts clamor for...tell the bankers to go fuck a Communist...Tspiras

Where are the Free Market Capitalist Leaders calling for a burn down of this rat infested shithouse?

SimplePrinciple's picture

Just call it a criminal enterprise, or TCEFKATUS--the criminal enterprise formerly known as the United States.  Ideological labels are simply old hat.

Shad_ow's picture

Capitalist? No.  Criminal?  Yes.

Both criminal and communist.

TheReplacement's picture

Forgive Firebrander.  He either does not have access to a dictionary or he does not comprehend the meanings of the words therein.

Real Estate Geek's picture

Rightwingnuts?  Go back to the Daily Kos where people still believe that there's a difference between Team Red and Team Blue.  Tool.

Upton's picture

HUH? WHat the hell you talking about?? Volitility moves the price. Time to make money if you get the right side of the trade.

Did you bet for the illusion or against it?? 

HowdyDoody's picture

"Where are the Free Market Capitalist Leaders calling for a burn down of this rat infested shithouse?"

'Free Market' is just a marketing slogan, a brand as are Republican and Democrat.

Words, if misused enough, eventually lose all meaning and are reduced to knee-kerk slogans, used to bypass thought. 'Obama is a Communist' is a prime example. By his actions, he is to the right of Bush. 'But Obamacare' you say? A law written by and for the benefit of large disease industry corporations.

swmnguy's picture

Thank you.  The intentional debauching of our political vocabulary is already working as intended.  It's getting more and more difficult to have the most rudimentary conversation, since none of the words mean anything.

Like Obama or not, he is no Communist.  No Communist in the history of ever favors diverting public wealth into private, corporate hands.  That's all Obama does.  He is a cautious, right-wing, corporate-owned politician in centrist clothing.  He puts on the center-left persona once in a while because his base, and indeed the balance point of American politics, is actually centrist to slightly left-of-center.  Not surprisingly, if you define things by what the names actually mean.  Right now, though, the media are owned by a small number of corporate interests who range from slightly right-of-center to far-right, and they have created the illusion that the American political balance point is somewhere right of center, and that the most energy is on the far right.

Obama's actions all promote and further the integration of government under corporate control.  That makes him a Fascist, by Mussolini's definitions.  I'd take Mussolini's word on that, if nothing else.  If your pet industry isn't one of Obama's crony paymasters, you may get shut out, but that certainly doesn't make him a "Socialist" or "Communist" (and those two words don't mean the same things either).