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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FireBrander's picture

"'But Obamacare' you say? A law written by and for the benefit of large disease industry corporations"

Glad to see at least one other person understands that..."ObamaCare' is NOT Socialized is Crony Capitalism.

THE VA HOSPITAL SYSTEM IS PURE SOCIALIZED MEDICINE...and yet, the Republicans, even the Uber Rightwingnuts, are willing to defend it with thier political lives.

Instead of "repealing ObamaCare", why not SHUT DOWN the VA, replace it with a free market system...and once that is a huge success, "repealing" the ACA will be easy...actually demanded by the people...

philipat'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."

Yes, but the alternative is just to accept the deliberate obfuscation implicit in, amongst many others, this OCC report and do nothing? It continues to amaze that NONE of the usual suspects has submitted a FOIA request for the documents in the CFTC Silver "Investigation".

The Holder appointment epitomises our age and illustrates better than any other appointment the "revolving door" syndrome. They obviously have no shame or embarassment and regard these things as just normal. Which again tells the dtory......

mbutler101's picture

No need to worry it'll be a 'controlled demolition' ;)

pndr4495's picture

Rockefeller - and one of the Patriarch's ( John Davison Rockefeller ) more famous quotes was that "competition was a sin."

WTFUD's picture

As in a School of Whales?

Implied Violins's picture

Shit Tylers, this is YOUR work?

Please divest yourselves of all nailguns, and don't enter tall buildings.

Eric Holder sure as shit will NOT be saving your ass, and I want to be able to come back here!!

FreedomGuy'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!"


Next, they will hire Jon Corzine to oversee customer accounts and Marc Rich will be in charge of political donations.

When does nepotism become incest?

GotGalt's picture

With Holder at the realm, time for some fast & furious PM running escapades!

CaptainAmerika's picture
CaptainAmerika (not verified) tonystarks Jun 29, 2015 8:05 PM

don't believe the internet

The Ingenious Gentleman's picture

Which means: Don't believe anything.

Hero (1992). All there is, is bullshit.

"People always talking to you about truth. Everybody always knows what the truth is like it was toilet paper or something and they got a supply in the closet. But what you learn as you get older is there ain´t no truth. All there is, is bullshit. Pardon my vulgarity here. Layers of it: one layer of bullshit on top of another. And what you do in life, like when you get older, is you pick the layer of bullshit you prefer and that´s your bullshit, so to speak."

TahoeBilly2012's picture

So are they long or short? It would seem they are short based the assumption they are holding prices down for the system itself, how can interpret the long and short of it?

Philo Beddoe's picture

Gov is a front man for the bankers. 

disabledvet's picture

That one might be true...

Having said that "riding oil down to twenty bucks a barrel" doesn't strike me as a very good way to corner a market.

I've certainly ne'er heard of anyone cornering a market by shorting it either.

I will say in the Government's defense "sometimes you just fuxk up and actually listen to your paymasters."

I mean a deflation??? Sure doesn't sound good for tax revenues let alone solvency.

You know how everyone loves an asset bubble though!

Shad_ow's picture

Yes, without the other, neither could have carried off the biggest theft in history.

Many ask why no political opposition.  Those not bought are trembling in their shoes.  This is so big nothing will stop them.

Philo Beddoe's picture

If you are the dealer at the table as well as the player at the table. Nobody gives a shit if anyone is cheating. 

disabledvet's picture

68 BILLION in Puerto Rican debt is a SHIT TON of money.

"Paging Jeb Bush of FLORIDA." We got a problem here?

slobbermut's picture

Though beyond my paygrade, if this was bullish for gold it would seem other huge market players would be sending NUGT vertical, but this is not the case; so they must be short.....yes?  Damn Damn Damn - there must be a huge play here!  I need to be smarter!!!

Gent's picture

Smarter only gets you closer to the nailgun....jus' sayin'.

SilverDoctors's picture

Good time is right. Legendary gold trader Jim Sinclair issued an alert tonight that The World Has Already Ended!

fukidontknow's picture

Is that you'll never see gold under $1600 where are my slippers Jim?

Lore's picture

That link was a waste of time.

stacking12321's picture

no, that's will forget more about the gold market in 1 day than you'll know about the gold market in your whole life, jim.

Hard Assets's picture

It's a fucking good time to get more 12 guage and 30-06 ammo.

TheEndIsNear's picture

Is that for real???

If so, if wish our own bureaucrats were half that honest.

ZH Snob's picture

if gold is being lumped in with FX it sounds like more paper gold to me, and that it was combined with FX to obscure the fact that no one knows where it really is or who really owns it.

Nobody For President's picture

Plus 1000 on the Puerto Rico You tube - unbelivable 'interview' with the PR Finance Minister, who must have been drunk jiving on about how they fooled the hedge funds and Paulson into believing they had money to pay back their debt.

The guy gets laughing so hard sometimes he can't talk - and he is the Finance Minister of the country? 

Just unbelievable, but it WILL crack you up - we need a whole bunch moar politicians/ministers this honest...

He'll probably be shot a dawn.

Watch it.

agstacks's picture

While hysterical, that cannot be real..Can it?  It looks like it's a video from the 80's. 

Baldrick's picture

that is extraordinary! if it is true? WOW!

fiftybagger's picture

John Paulson just watched that video and is not laughing:

"Paulson has also been one of the biggest financial backers of Puerto Rico. Last year, he called the U.S. territory the Singapore of the Caribbean."


fiftybagger's picture

A peak into America's future:

"According to Cohen, the unemployment rate is 13.7%. Only 700,000 of the 3.5 million people, or 20%, work in the private sector. The other 80% either are on welfare, or they receive unemployment or other aid, or they work for the government"


SoCalBusted's picture

What do the charts show for Copper and Aluminum?

BandGap's picture

I believe Goldman was shown to be manipulating aluminum.

disabledvet's picture

"Because the 100,000 dollar Model S is FLYING off the showroom floor!"

disabledvet's picture

"Because the 100,000 dollar Model S is FLYING off the showroom floor!"

SoCalBusted's picture

Thanks - Heard that GS was up to BS.  Trying to determine is recent price drops are due to lack of demand or something else.

One And Only's picture

A PUT or A CALL is a derivative.

Every ETF is a derivative.


coast's picture

And today doesnt show at all that they control the precious metals market...stocks down, dollar down, people buying up gold all over the world, but gold is down 2 bucks....If there was any doubt that they are suppressing the price of gold, today should take all doubt away.  I only complain because I dont have the money to buy more, and it pisses me off....

FireBrander's picture

WTF are you talking about...think for Christs sake...if you "controlled the precious metals market" wouldn't you want the price to ramp up (at your command) and then CRASH (right after you went short) when you felt the bull had run far enough?

Nutjobs galore.



tenpanhandle's picture

Did you just fall off of the turnip truck?

fiftybagger's picture


How does that statement square with the 130 plus TRILLION in derivates just mentioned in the article.  You give the word dumb a whole new meaning.

Stained Class's picture

"Cornered"? Like what the FED did to the US Treasury market?

Please elaborate, if mental capacity permits....

kaiserhoff's picture

No worries.

Just shorting the Drachma.

knukles's picture

So, did they lump gold with FX because gold is money now?
I didn't think so, either.

Amish Hacker's picture

Not likely, but they do lump gold-in-the-vault with "gold receivables," (what most people would call "promises that won't be kept.") 

Renov8's picture

Every commodity price and financial instrument is being manipulated to keep the charade alive and going........this is the biggest scam in history.


Wish I had more money to sing into metals.........

Kirk2NCC1701's picture

So... ALL they have to do, is to ask for Delivery -- and thus 'corner' the so-called 'Market' where it really counts:  Possession of Assets, not Paperware.

What say you, BRICS and AIIB?  What's that?  Did I hear "Molon labe"?