Market Manipulation

As investors and market participants become increasingly aware of the regulatory failures that allowed for manipulation of LIBOR, FOREX, municipal bond bidding and certain commodities markets, regulatory sources are increasingly expressing concern that they have paid too little attention to potential manipulations of an arguably larger, more systemically important and less regulated market – the CDS market as self-governed, through ‘regulatory license’, by the International Swaps and Derivatives Association (ISDA).

To all those wondering if everything is rigged, we have a very simple answer: Yes.

Q: Are orders entered for the purpose of igniting momentum in the market prohibited by The Rules?

This conduct may be deemed to violate the Rules if it is determined the intent was to disrupt the orderly conduct of trading or the fair execution of transactions, if the conduct was reckless, or if the conduct distorted the integrity of the determination of settlement prices. Further, this activity may violate the Rules. if the momentum igniting orders were intended to be canceled before execution, or if the orders were intended to mislead others. If the conduct was intended to create artificially high or low prices, this may also constitute a violation of the Rules

The Russian Ruble has collapsed this morning. Despite a modest dead-cat-bounce-like rally in crude oil, the Ruble is down almost 3 handles smashing through the 61/USD level for the first time ever. Minutes after flash-crashing to 61.46/USD, officials, according to Reuters, halted trading in certain instruments to “prevent possible manipulation of equity futures market." Russia's 5Y CDS has broken above 500bps for the first time since 2009 (+21bps today), the RTS stock market is down over 6%, and 5Y bond yields are pushing towards 13%. It seems Putin is increasingly being put under pressure to do something...

A recent interview with a precious metals commentator in the Alternative Media raised several interesting points. While a number of the points raised are/were worthy of discussion; the topic which will be the focus of this commentary are the remarks (and conclusions) which were presented there concerning China’s “role” (if any) in the utterly fraudulent, global paper-silver market.

First it was humans. Now it is vaccum tubes.

Once upon a time it was the Sicilian, or Russian, or Japanese, or Chinese mob that were some of the biggest sources of funding for corrupt government officials (incidentally, most of them). After all, the government is smart enough to realize that it is more lucrative to "cooperate" with the world's biggest criminal syndicates than to wipe them out and cut off a major source of funding (of course, when it comes to populist optics and reelection, there is always an easy low-level perp walk every week or so to keep the peasants in place... and Diebold).

Giant Banks Take Over Real Economy As Well As Financial System … Enabling Manipulation On a Vast Scale

If only the $3.2 billion Goldman Sachs Global Opportunities hedge fund had listened to the firm's equity strategists, life would have been great. However, as Bloomberg reports, the so-called 'best-ideas' fund dropped 5.6% in October leaving it down 2.6% for 2014 as interest-rate bets went pear-shaped amid the crash-and-dash that was October's market manipulation. "We believe monetary policy needs to catch up with growth, and that interest rates in the US and UK are likely to rise by a significant amount," the fund wrote. It seems Goldman 'muppeted' itself. Things aren't working out... and as a gentle reminder, the fund lost 35% in 2008.

• Scuttled deals worth $580 billion put hedge funds on back foot (Reuters)
• Mounting Pressure on OPEC Spurs More Wagers on Oil Rally (BBG)
• It's not just US real estate: Chinese Students at U.S. Universities Jump 75% in Three Years (BBG)
• Frankfurt Open for Yuan Clearing as Liquidity Rises (BBG)
• Obama defends healthcare law after adviser criticism (Reuters)
• Michael Hasenstab Bets Big in Controversial Places (WSJ)
• Facebook seeks foothold in your office (FT)
• Russia Seen as Greatest Threat in Poll as Oil Erodes Putin Power (BBG)
• Falling Oil Prices Test OPEC Unity (WSJ)

As expected, the stench in market rigging, be it Libor, FX, gold or anything else, goes to the very top...

"When the next period [of real market turmoil] appears... there is a very real possibility that the (central banks and major governments) cavalry’s thundering hooves will cause investors to get even more frightened and run away, perhaps having lost confidence in the effectiveness of the central bankers’ toolkit..."

And then there was the precious metals market: a market which all the Keynesian fanatic paper bugs said was immune from manipulation, be it of the central or commercial bank kind, even with every other market clearly exposed for perpetual rigging either by hedge funds, by prop desks, by HFTs, or central banks themselves. Sadly this too conspiracy theory just was crushed into the reality of conspiracy fact, when moments ago the FT reported that alongside admissions of rigging every other market, UBS - always the proverbial first rat in the coalmine, to mix and match metaphors- is about to "settle" allegations of gold and silver rigging. In other words: it admits it had rigged the gold and silver markets, without of course "admitting or denying" it did so.

More than originally estimated, apparently...

If you want to hide something in plain view, exaggerate it to the point it becomes extreme and convert it to a conspiracy theory.