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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The Ingenious Gentleman's picture

I tried that once, asking for physical delivery of silver I had with my bank for decades. "Oh, we don't do that!" said the bank guy in horror.

The "storage charges" were more than the value of the silver at that point, but when I talked about phyisical delivery, they decided to negotiate a reasonable deal to cash in my silver.

bluskyes's picture

You were nicer than me, I told TD I would sue their asses, if they didn't redeem the certificate I purchased. They said I was just holding an instrument that tracked silver - to which I replied: "Why am I being charged storage fees?"

buzzsaw99's picture

unlike you or i jpm doesn't have to worry about counterparty risk. they get that insured up to infinity for free from the fed.

El Vaquero's picture

lim 1/x as x-> infinity = 0


That's the intrinsic value of electronic fiat.  Physical fiat has some intrinsic heating value, or some bumwad intrinsic value.

tool's picture

So is this the Fed using JPM to suppress gold?

Pinto Currency's picture



JPM is one of the primary shareholders of the NY Fed.

JPM uses the Fed not vice versa.

El Vaquero's picture

It's tough to know who uses who here.  Unless you're talking about the bankers and the government using us, then it's pretty clear.

q99x2's picture

It is a matter of National Security that the banks are stealing all there is to steal from the western world but even the Somalian pirates know the gold stash has been moved to Jamie Dimon's island.

Onlygold1's picture

ok so now what do i do? as the moniker implies <vbg> silly me

philosophers bone's picture

The new mantra for Securities Regulators and Financial Institituion Regulators is the "stability AND integrity" of the financial markets.

1.  "Stability" should not be an end in and of itself if it implies or constitutes market manipulation.

2.   Market manipulation destroys the "integrity" of the capital markets, as it leads to mispricing of risk and malinvestment.

3.   Therefore, there is a tension between the goal of "stability" and "integrity".

4.   Integrity should be given a far greater weight than stability because an unstable market may eventually stabilize (and there may be good reasons for the instability) whereas a market that loses integrity (and the trust of market participants) may never regain that trust.

By seeking / permitting "stability" at all costs, it actually leads to the ultimate destruction of the markets through loss of confidence.

reader2010's picture

if this is not the ultimate violence against humanity,  what else is? 

TheReplacement's picture

How about a certain President-to-be in a thong, bending over?

Paging WB7!


RaceToTheBottom's picture

How does this compare to the Derivatives of the Douche Bank?  One buying the others?

youngman's picture

The world is falling apart...and gold and silver are doing nothing...strange..very strange

logicalman's picture

Gold and silver are doing what they've always done - remained solid.

It's paper that's doing all the dancing.

What's strange is how few people understand that.

Kaiser Sousa's picture


amd sincde they keep putting the shit on sale im sitting back buying 20 oz's of Silver every 2 weeks...

just to fuck with them-fucking assholes....


FireBrander's picture

Strange? Why? Name for me the "wealthy" nations of the world where the common person has $1200 to invest in a 1oz lump of metal rather than an iphone or something else they can use or eat?

The world is broke sir...hard to drive up the price of something few can afford...the only entities with money are banks and governments...and why would they buy gold?

tenpanhandle's picture

750 trillion notional out there all dressed up and nowhere to go.  I am trying to visualize all that hitting the iphone and food market.  The gold and silver door will get locked up solid sometime in the near future.   You will be locked out with the other 99%.

Kaiser Sousa's picture

"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"

answer - because Gold and Silver is money, and they know it but dont have any.....

gimli's picture

Jaime is a whale god

Seagate's picture

Banksters don't like their own paper???

Say it ain's so....

Onlygold1's picture

falling? what you did not see it, Fallen apart is the correct term-

gwar5's picture

A Greek, a Puerto Rican, and a JPM banker walk into a Chinese bar.....

A Lunatic's picture

And swear under penalty of perjury they are American Citizens and promptly vote for Hillary Clinton........

BlackChicken's picture

Bill Clinton, Hilary Clinton, and Al Gore were in an aeroplane that crashed. They're up in heaven, and God's sitting on the great white throne. God addresses Al first.

"Al, what do you believe in?"

Al replies, "Well, I believe that the combustion engine is evil and that we need to save the world from CFCs and that, if any more freon is used, the whole earth will become a greenhouse and we'll all die."

God thinks for a second and says, "Okay, I can live with that. Come and sit at my left."

God then addresses Bill. "Bill, what do you believe in?"

Bill replies, "Well, I believe in power to the people. I think people should be able to make their own choices about things and that no-one should ever be able to tell someone else what to do. I also believe in feeling people's pain."

God thinks for a second and says, "Okay, that sounds good. Come and sit at my right."

God then address Hilary. "Hilary, what do you believe in?"

"I believe you're in my chair."

Philo Beddoe's picture

Chinese bartender states I do not serve assfuckers here. 

The JPM banker and Greek leave. 

Chinese bartender shouts hey I told you no assfuckers. 

Ricky Martin leaves. 

gwar5's picture

.....After 12 rounds of drinks they're all drunk and it's last call.

The Greek and the Puerto Rican tell the bartender the drinks were no good. They refuse to pay and they refuse to leave. They go on and order more drinks. 

The banker offers to pay their tab.....



Kaervek's picture

Who gets out alive? The chinese?

kindape's picture

@ZH so what? its probably almost all eurodollar futures. basically libor 3 month future contracts which a billion notional has maybe 1 million-2 million in risk.  i think this says that JPM is biggest commodity dealer. doesnt mean theyre doing anything criminal

Tyler Durden's picture

No, it is not eurodollar futures at all: those are found in the Interest Rate section, of which incidentally JPM had $47.3 trillion in Q1 as per Table 8.

And that $47.3 trillion, by the way, is only "bilaterally netted" as long as not a single counterparty in the collateral chain fails. Which is why AIG had to be saved at a cost to taxpayers of about $20 trillion.

El Vaquero's picture

I'm glad I'm not the only one who browses these reports.  Thanks Tyler, for pointing this out.  

techstrategy's picture

Tylers: I know you hate GLD ("paper gold ").  But, it is allegedly allocated and audited.  All WE have to do to expose the fraud is sell all the not really too big to jail mark to unicorn equities (over $1T source of funds, so less than 3% would be sufficient to acquire the entire GLD at current prices) to buy GLD and demand delivery.  Should they fail to deliver, the Sponsors and Authorized Participants would all be UNEQUIVOCALLY guilty of fraud and no amount of CFTC bullshit could save them.


It's time for those of us who invest of savings rather than " money " (phantom debt claims created from nothing, where the not really TBTJ banks collect seigniorage via Cantillion effect and we all bear the inflation) to harness their nearly infinite abuse of asymmetric leverage, knowledge of positions and control of effective money supply against them.  Liquidate their control frauds (which include the cash from financing consumption ponzis like AMZN and NFLX that are given subsidized access to unlimited "money" while others are out under engineered duress) to raise cash (5% physical to put pressure on the fractional reserve control fraud) and take possession of GLD.  Each and every day.  $ for $.  Without leverage.  Their accumulated abuses will crush them.

cro_maat's picture

This is why it is important to read the prospectus of ETFs. Here is what the SEC.GOV says:

Investors can buy and sell shares of GLD—which are backed by physical gold bullion—through exchanges around the world, including the New York Stock Exchange, the Bolsa Mexicana de Valores, the Singapore Stock Exchange, the Tokyo Stock Exchange and the Stock Exchange of Hong Kong, much like any other stock.
But you may be wondering… Who creates those shares? Why and when are new shares created? And how is it done?
The Trust’s Authorized Participants or APs are the only entities permitted to create and redeem GLD shares, which can only be done in blocks of 100,000 shares, called baskets.
There are many reasons why an AP may choose to create or redeem a basket of shares, but the primary reason is to create inventory for the secondary market, where investors buy and sell shares on an exchange just like any other security.
Here’s how the creation process works: An AP initiates the creation of one or more baskets of shares by calling in an order to Bank of New York Mellon, GLD’s trustee. The AP is then responsible for the delivery of gold in the form of London Good Delivery Bars to GLD’s Trust, which is held by the Trust’s custodian, HSBC, in its vault in London. London Good Delivery Bars must be in compliance with the standards set forth by the London Bullion Market Association with respect to size, weight and fineness.

If memory serves me, there are only 5 APs and JPM is one of them. The GLD was set up for the bullion banks to finance their gold inventory via the Sheeple. Mission accomplished. No delivery for you.

logicalman's picture

Fractional reserve banking is, basically,fraud.

I thknk that means JPM and all banks are criminal enterprises......

How much does a politician, or a SC judge cost these days?

Let's just say, if you can print however much you need, price becomes irrelevant.


El Vaquero's picture

Exactly.  They're a ponzi scheme.,GDP,M2


Notice that the one time the blue line went down, we got the AIG bailout, TARP, ZIRP, QE1, QE2, Operation Twist, QE3 and probably some other shit that we never heard about.  If that blue line goes down, eventually it will suck the "money" out of the system and there won't be enough for everybody to service their debts.  It MUST continue to rise.  

CHC's picture
CHC (not verified) Jun 29, 2015 9:20 PM

The public - ZeroHedge included - ONLY know what the banks want us to know - not a damn thing more.  Believe it and you CAN TAKE THAT TO THE BANK!

Philo Beddoe's picture

Probably so. However, it is a very nice piece of investigative journalism by ZH. 

Investigavtive journalism used to be an oxymoron. 

corsair's picture

Investigavtive journalism used to be a pleonasm.

Now it's an oxymoron.

logicalman's picture

I would disagree.

If you dig hard enough, it's surprising what can show up.

Most people don't put in the effort to find out what's really going on - distracted by all the classic divide and conquer techniqes employed by TPTB.

Poke around and find things like 1911 Thomson Dictionary of Banking - a lot of what's going on is more understandable by the study of such documents, but it takes time and effort.

Oh look, there's a reality TV show on the lying, manipulative screen over there. Requires no effort - shuts off the mind.

The world's fucked.


El Vaquero's picture

You know what kinds of TV shows kick ass?  Shows on things like Egyptology and the technology in antiquity.  Nature shows.  Science shows.  Things like that.  But you know what?  Back when there were fewer channels, there were more of those kinds of shows.

logicalman's picture

I would agree.

I've not had a TV this century. I think my kids are 2 of the very few of their generation that grew up largely free of its influence.

I always enjoyed those kinds of programs, but to get channels showing them, I have to sign up for a 'package' that means I would be enriching those who use TV against us.

The only vote that's always counted is when you vote with your wallet.


swmnguy's picture

Shows like that cost a lot more to make than just rounding up some compliant freaks and telling them what would be funny for them to do in front of a camera.

El Vaquero's picture

I'm not sure about the costs, but they do have to find somebody knowledgable in the subject.  I sniff a lot of them out online though.  What's funny is when you're watching a show on ancient Rome or Greece and out walks Peter Weller.  

swmnguy's picture

Hah!  Yes, that kind of appearance is pretty weird.

Yes, paying researchers and getting the rights to use experts and their work takes more time, and therefore costs more money.  The filming and production costs are more or less similar, if you're going to shoot anything at all visually interesting.  

"Reality" shows are dirt-cheap.  No actual writers; the Producers script it all, and loosely at that.  The rubes clowning around get paid nest to nothing.  They usually go someplace cheap and wreck stuff or run around, so it's incredibly cheap.  I know a few people who've gotten crew work on them, and have been involved in pitching concepts to all the various interested networks.  I wouldn't get involved with that kind of work; if I needed money that badly I'd rather work in kiddie porn snuff films; something you could admit to your parents, you know.

JD59's picture

I'm watching reruns of BlackHawk down.

TheReplacement's picture

Do you mean the Egyptology shows where they talk about ancient slaves using primitive tools to build magnificent buildings by hand with astonishingly precise astrological features that last thousands of years, the likes of which we cannot duplicate even to this very day? 

Perhaps you mean the Egyptology shows that wave a shiny thing over here so we don't notice things like Sumer and Gobekli Tepi?

Understand this, I am not picking on you, just pointing out that if it is on TV it is most likely a lie or utterly meaningless. 

Perhaps you've seen this.  It seems somewhat interesting but dry and long.

El Vaquero's picture

I wasn't aware that slaves built the pyramids.  And pending financial collapse meaning that we won't be able to do much of anything not withstanding, who says that we would be incapable of building something like the pyramids today?  The only things stopping us are that 1) we don't really want to build something like that and 2) our fucking economy is falling apart.  Had we wanted to do something like that 20 or 30 years ago, it would have been done, and a lot faster than the Egyptians had done it.  But, there are some really clever ways of doing shit without diesel engines and hydraulics.


After he raised that block using his teeter toter method, he could have built wheels around it and used it as an axle and simply rolled it to wherever he wanted had his desire been to move it rather than to stand it up.  There are a lot of forgotten tricks to make seemingly impossible tasks possible. 

TheReplacement's picture

I think we all know the end if pretty fucking nigh.  The rest of the public knows that some show is on tonight.