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JPMorgan Trader Accused Of "Breaking" CDS Index Market With Massive Prop Position

Tyler Durden's picture


Earlier today we listened with bemused fascination as Blythe Masters explained to CNBC how JPMorgan's trading business is "about assisting clients in executing, managing, their risks and ensuring access to capital so they can make the kind of large long-term investments that are needed in the long run to expand the supply of commodities." You know - provide liquidity. Like the High Freaks. We were even ready to believe it, especially when Blythe conveniently added that JPM has a "matched book" meaning no net prop exposure, since the opposite would indicate breach of the Volcker Rule. ...And then we read this: "A JPMorgan Chase & Co. trader of derivatives linked to the financial health of corporations has amassed positions so large that he’s driving price moves in the multi-trillion dollar market, according to traders outside the firm." Say what? A JPMorgan trader has a prop (not flow, not client, not non-discretionary) position so big it is moving the entire market? And we are talking hundreds of billions of CDS notional. But... that would mean everything Blythe said is one big lie... It would also mean that JPMorgan is blatantly and without any regard for legislation, ignoring the Volcker rule, which arrived in the aftermath of Merrill Lynch doing precisely this with various CDO and credit indexes, and "moving the market" only to blow itself up and cost taxpayers billions when the bets all LTCMed. But wait, it gets better: "In some cases, [the trader] is believed to have “broken” the index -- Wall Street lingo for the market dysfunction that occurs when a price gap opens up between the index and its underlying constituents." So JPMorgan is now privately accused of "breaking" the CDS Index market, courtesy of its second to none economy of scale and fear no reprisal for any and all actions, and in the process causing untold losses to, you guessed it, its clients, but when it comes to allegations of massive manipulation in the precious metals market, why Blythe will tell you it is all about "assisting clients in executing, managing, their risks." Which client would that be - Lehman, or MFGlobal? Perhaps it is time for a follow up interview, Ms Masters to clarify some of these outstanding points?

From Bloomberg:

The trader is London-based Bruno Iksil, according to five counterparts at hedge funds and rival banks who requested anonymity because they’re not authorized to discuss the transactions. He specializes in credit-derivative indexes, an off-exchange market that during the past decade has overtaken corporate bonds to become the biggest forum for investors betting on the likelihood of company defaults.


Investors complain that Iksil’s trades may be distorting prices, affecting bondholders who use the instruments to hedge hundreds of billions of dollars of fixed-income holdings. Analysts and economists also use the indexes to help gauge interest rates that companies must pay for new credit.


Though Iksil reveals little to other traders about his own positions, they say they’ve taken the opposite side of transactions and that his orders are the biggest they’ve encountered. Two hedge-fund traders said they have seen unusually large price swings when they were told by dealers that Iksil was in the market.

So how long until Bruno Iksil, and his massive one way bet, becomes the next Glenn Hadden, or the next Howie Hubler, or the next Boaz Weinsten? And how long until US taxpayer have to bail him out, either with direct rescue money, or with commingled deposits used to plug trading losses? Because MFGlobal was just an appetizer as to how JPM operates with "segregated" money.

Repeating the punchline again, because it bears repeating.

In some cases, Iksil is believed to have “broken” the index -- Wall Street lingo for the market dysfunction that occurs when a price gap opens up between the index and its underlying constituents, the people said. The persistence of price dislocations has frustrated some hedge funds that were betting on the gap to close over time, the people said.

And that, for those confused, is how JPMorgan operates: they lie about everything, fully aware they have perpetual immunity because they are more powerful than the Fed (just recall Jamie Dimon's symbolic spitting in the face of Ben Bernanke), they are a tri-party repo dealer thus in the center of the entire shadow banking system, and have the biggest single-bank derivative exposure in the world, at $70 trillion as of December 31.

JPMorgan is modern finance.

And because of they they can and will get away with everything, lying on prime time TV most certainly included.

Yet while JPMorgan may manipulate the gold, silver, or any other market, for its or the Fed's agenda, there is a silver lining: it allows everyone to buy physical assets at artificially deflated paper spot prices. And for that, JPM should be thanked. Because until the grand reset takes place, JPMorgan will never be held accountable for any of its actions in the current status quo regime. Period.

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Thu, 04/05/2012 - 20:42 | 2320956 maxmad
maxmad's picture

Black swan, bitchez!

Thu, 04/05/2012 - 20:49 | 2320968 nope-1004
nope-1004's picture

Blythe Swan, Muppitchez!

Like any of us for a second thought she was telling the truth, and that JPM acts honorably in a rehypothecated jungle.

Remember, Blythe is one of the inventors of the CDS.  The firm is corrupt and she is a liar.



Thu, 04/05/2012 - 20:55 | 2320973 GetZeeGold
GetZeeGold's picture



Paging Blythe Masters......clean-up on aisle 5.


Thu, 04/05/2012 - 20:55 | 2320983 LetThemEatRand
LetThemEatRand's picture

At least now we know why they trotted out Blowthe Masters on Everythingisgreat TV today.

Thu, 04/05/2012 - 20:57 | 2320987 GetZeeGold
GetZeeGold's picture



No Muppets were killed during the taping of the Everythingisgreat TV show today.


.....a couple were really roughed up though.


Thu, 04/05/2012 - 20:58 | 2320989 Marginal Call
Marginal Call's picture

Muppets get fisted.  That's just how chit works.

Thu, 04/05/2012 - 21:19 | 2321018 GetZeeGold
GetZeeGold's picture



They should have known that going in. It was definitely in bold letters in the contract.


Squeeze your fingers together and took at it.....it's that.....sign here Muppet.


Fri, 04/06/2012 - 00:41 | 2321328 Oh regional Indian
Oh regional Indian's picture

Whoa! blythe lied? Blythely too?

I'm telling you, more convinced than ever that these key characters are chosen for their names. 

Diamond blythely told Dimon to Crash-the-Curry Trade so that Fink could turn over the Blackstone and...... you can make a whole story, and it all fits.

Lies and NUMBers. 

Got to admit i was slightly taken in for about 45 seconds yesterday. Perhaps it's the accent.



Fri, 04/06/2012 - 01:31 | 2321362 strannick
strannick's picture

Email the CFTC Commisioners, bitchez. Tell them about the discrepencies between Ms. Masters CNBC claims and Mr. Iskil's trades. Dont spare the whip on these scoundrels

jsommers@cftc.gov ; Somalia@cftc.gov ; ggensler@cftc.gov ; nmcnair@cftc.gov


Fri, 04/06/2012 - 01:43 | 2321380 AldousHuxley
AldousHuxley's picture


at the depths of the Panic of 1893, the Federal Treasury was nearly out of gold. President Grover Cleveland accepted Morgan's offer to join with the Rothschilds and supply the U.S. Treasury with 3.5 million ounces of gold.


In 1912, the Pujo Committee found that a cabal of financial leaders were abusing their public trust to consolidate control over many industries: the partners of J.P. Morgan & Co. along with the directors of First National and National City Bank controlled aggregate resources of $22.245 billion. Louis Brandeis, later a U.S. Supreme Court Justice, compared this sum to the value of all the property in the twenty-two states west of the Mississippi River


As required by the 1933 Glass–Steagall Act, the "House of Morgan" became three entities: J.P. Morgan & Co., which later became Morgan Guaranty Trust; Morgan Stanley, an investment house; and Morgan Grenfell in London, an overseas securities house.


Easy to do when Americans are proud idiots. Repeal of Glass Steagall allowed banksters to do a repeat of early 1900s. Government is broke, so borrows from private capital of banksters giving banksters power over nation's laws and resources.

Bankster partying >>> Depression >>> War

Fri, 04/06/2012 - 11:41 | 2322255 Nukular Freedum
Nukular Freedum's picture

I dont know if this little thought experiment would work in practice? Just posted it on my blog:


How to break silver with no money down: 

if rumours regarding the manipulation of the silver market by large government related interests (utilizing JP Morgan as a vehicle) are true and if (as is certainly the case) the paper silver market (slv etc.) is run on a fractional reserve basis then it would certainly be possible for a large enough entity, if so interested, to expose these facts (and crash the paper silver market) for essentially no risk. 
 How might this stupendous feat be achieved you ask. Well in essence the entity (maybe a govenment or bank I don't know, maybe a foreign power such as Iran) would purchase enormous amounts of the metal for physical delivery (enough to test the aforementioned sceptical hypotheses) whilst simultaneously purchasing an off-setting position in the paper market. The entity would have to insist on physical delivery of course and if the exchange (presumably Comex) could not deliver, well, one would think, that would amount to cornering the market in physical silver and would prevent contracts held by other parties being fulfilled as well. All hell would break loose, no? And if the pressure were to be maintained by the entity concerned it would surely break the paper market ultimately?
 How to profit from someone someday doing something like this? Simply mimick their position (long physical short paper) and wait indefinitely. Double win for no risk, no?

Fri, 04/06/2012 - 11:44 | 2322270 Nukular Freedum
Nukular Freedum's picture

My Apologies: the header should read;

How to break Paper Silver with no Risk

Fri, 04/06/2012 - 08:24 | 2321631 BeetleBailey
BeetleBailey's picture

You assume these sock puppets actually read their emails. And if they do, heed them. All it is - emailing them - and exposing your intelligence, is alert Homeland Security to link you with their ever-expanding data base of "dangerous people to be watched closer".

Stay safe my friend.

Sat, 04/07/2012 - 06:24 | 2324225 dufferin
dufferin's picture

Fear is what they want.

Fri, 04/06/2012 - 10:13 | 2321971 Thisson
Thisson's picture

There is no discrepancy.  Masters was speaking about commodities.  Iksil is in credit markets.  CFTC has no jurisdiction in credit markets...

Fri, 04/06/2012 - 01:30 | 2321366 AldousHuxley
AldousHuxley's picture

JP Morgan doesn't exist for investors, it exists to protect the super elites' (Rockefellers, Rothchilds, Morgans, etc.) wealth by having their hands in every industry so that nobody will top them.


When you become a billionare, you put your work in government and wealth in banks to diversify. When you own the land and its law you don't care which particular industry does well as risks are spread around.


Ironic thing is that people do banking with the biggest banks (wealthiest owners) because of fear and rich get richer because smaller poor banks (rich but not superrich) are not given the chance.


You never get quality from biggest anything (government, non-profit, restaurants, businesses) because quality doesn't scale. Thus winner takes all games (government, banks, religion)  that never reset always end up serving McDonald's quality service and products. Only thing you get is decreased risk, and bulge bracket banksters took advantage of this trust by gambling with it.


Give a chance to the smaller banks who can only compete on superior product/service....

Fri, 04/06/2012 - 11:32 | 2322227 Deo vindice
Deo vindice's picture

Give a chance to Credit Unions. I moved from bank to CU years ago and have never regretted it. (Although even with them I am a 'minimalist' customer)

Thu, 04/05/2012 - 21:14 | 2321026 macholatte
macholatte's picture




Is Blythe any relationship to Rick Masters?


Start at 0:50




Thu, 04/05/2012 - 21:17 | 2321033 GetZeeGold
GetZeeGold's picture



It's all about that.


Start at 0:00



Thu, 04/05/2012 - 21:55 | 2321047 peekcrackers
peekcrackers's picture

Tyler .. cheers to your relentless hard work for the quest to expose the truth .

Thu, 04/05/2012 - 22:33 | 2321191 CrazyCooter
CrazyCooter's picture

Heh, maybe Blythe will call in dead ...


Sorry, I love this song. It must be the 1/4 British ancestry ... explains my horribly dark/dry sense of humor ... or maybe I am just autistic ... you decide ...

Fuck, folks, the markets are calling in dead ... for FSCKING years now ... and investors are like the employer that can't do the math.

FYI, the produced recording is MUCH better, this is all I could find. I think he tries to hard at times, but the song is good. This is the only performance on youtube, which is live, and not that good, but ...



Thu, 04/05/2012 - 22:50 | 2321211 jeff montanye
jeff montanye's picture


Thu, 04/05/2012 - 21:31 | 2321070 SGS
SGS's picture

Made a call today.  Word is Blythe does not like penis anymore.  No joke.  Just sayin'.  Got Poon?

Thu, 04/05/2012 - 22:08 | 2321156 El Oregonian
El Oregonian's picture

Intellectuals solve problems; geniuses prevent them.- Albert Einstein

Thu, 04/05/2012 - 22:26 | 2321180 palmereldritch
palmereldritch's picture

BHO should have had Rick do the Birth Certificate

Thu, 04/05/2012 - 22:01 | 2321140 Papasmurf
Papasmurf's picture


Thu, 04/05/2012 - 23:56 | 2321289 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Now we go on about those muppets again. Blah blah blah. Don't you know that robbing from muppets is our game.

-Wall Street

Fri, 04/06/2012 - 00:22 | 2321315 old naughty
old naughty's picture

we did a lot more than robbing...

Thu, 04/05/2012 - 20:58 | 2320988 NewThor
NewThor's picture

JPMorgan Chase and The Federal Reserve are hydra heads of the same


Wait until the world finds out the Planets and the Sun matter...

and the real Masters arrive.


Fri, 04/06/2012 - 00:24 | 2321318 old naughty
old naughty's picture

can we muppets count on it?

Thu, 04/05/2012 - 23:20 | 2321248 Wakanda
Wakanda's picture

Also explains why she performed so poorly.

They are scared shitless.  It's gonna be a loooooong weekend at the Hamptons.

Thu, 04/05/2012 - 20:55 | 2320981 jcaz
jcaz's picture

We'll never hear from that chick again-  the JPM lawyers are swarming her as we speak,  she's personna non grata to the outside world now;

Pity-  I was hoping she'd "help" me........

Thu, 04/05/2012 - 21:07 | 2321014 NewThor
NewThor's picture

Has there been a physical sighting of Corzine in the last 3 months?

Thu, 04/05/2012 - 22:03 | 2321144 Papasmurf
Papasmurf's picture

He's recoverying nicely from his plastic surgery makeover.

Fri, 04/06/2012 - 09:08 | 2321784 GetZeeGold
GetZeeGold's picture



Hes in France with his buddy Roman Polanski.


Thu, 04/05/2012 - 22:20 | 2321169 brettd
brettd's picture



Thu, 04/05/2012 - 23:01 | 2321225 zanez
zanez's picture

Holder?  Bwahahahahahaah.

Thu, 04/05/2012 - 23:08 | 2321229 IrritableBowels
IrritableBowels's picture

Fucking bitch-ass mutherfuckers

Thu, 04/05/2012 - 21:41 | 2321097 centerline
centerline's picture

+1.  Just another modern day gangster.  They know they are not working in the best interest of humanity or nation.  This is power and wealth at any cost.  Consequences don't matter - especially when the system is captured.  Kill or be killed mentality.  A blood sport at this point.

As always, human evolution tramples it's greatest promises with typical Alpha behavior.  Maybe some other species will do better than us.  I doubt it though.  Which leads to the hypothesis that the reason we dont see more intellegent life in the universe that is capabable of interstellar travel is that most intelligent species don't outlive thier industrial age (adolescence).

Thu, 04/05/2012 - 23:14 | 2321233 IrritableBowels
IrritableBowels's picture

See also: japan/nukes.

The 'native americans' had it fucking right.
Those uncivilized bastards.

Custer was a fucking prick.

Thu, 04/05/2012 - 23:27 | 2321254 Kassandra
Kassandra's picture

Either that or we are strictly "observe only" for the safety of the observers. Hell, I wouldn't be here but I was born here. My bad luck.

Thu, 04/05/2012 - 23:32 | 2321259 r00t61
r00t61's picture

The Fermi paradox - a theory that I happen to agree with.

Fri, 04/06/2012 - 01:32 | 2321367 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

are you sure about that?



Thu, 04/05/2012 - 22:05 | 2321150 jekyll island
jekyll island's picture

She didn't look as pretty on CNBS as she does in photos, and the accent just doesn't do it for me.  Sorry Blythe, gonna have to turn the page and move on.  I hope you understand, it's me.  I guess I'm just not into you.  

Thu, 04/05/2012 - 23:38 | 2321265 vast-dom
vast-dom's picture

Only thing left is for these people and their institutions to get sucked up from below into some horrific earthquake blackhole -- everything else is really too kind a fate.

Thu, 04/05/2012 - 23:47 | 2321277 beaker
beaker's picture

CNBC is getting farther and farther from reality every day.

Thu, 04/05/2012 - 20:48 | 2320969 GetZeeGold
GetZeeGold's picture



No no no.....Blythe just told us this could never happen!


Thu, 04/05/2012 - 21:03 | 2321007 NewThor
NewThor's picture

And the roulette ball bounces into the dreaded and mytholgical TRIPLE ZERO.

Awwww. 1 Quadrillion bet loss.

Can somebody please paper over this whole?

Hey. I bet on the Quadruple Texas Tornado + Solar Maximum-ing Sun triangle filament growth, but I didn't bet in $$$$'s, Euros, silver or gold.


Thu, 04/05/2012 - 21:58 | 2321132 peekcrackers
peekcrackers's picture

Blythe " we just don't do that " ... fuck off ass wart

Thu, 04/05/2012 - 21:37 | 2321087 Buck Johnson
Buck Johnson's picture

No kidding, I never heard about this institution and it has at least a Trillion if not more that is warping the CDS market.  I've said this before, I think that there is a few monsters under the dark sea of finance that we have seen the shape but not the creature.  When it breaks the water surface we will know for a fact.  Also if you think that MF Global was the only one doing what they did, I have a bridge to sell you dirt cheap.

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