Participants in the silver bullion market witnessed perhaps the most egregiously blatant occurrence of silver manipulation in history Thursday, when the 6 large fixing bullion banks rigged the London Silver Price down 84 cents (6%) from current spot and futures trading resulting in the lowest silver price fix since 2009.
Dealers blamed Thursday’s action on rules – decided by the compliance departments of banks and brokerages, and aimed at meeting the new regulatory regime – which block traders participating in the benchmark auction from “arbitrage” in other silver markets at the same time.
The head of the trade desk of one of the world’s largest bullion wholesalers provided his insight:
The key is the highlighted paragraph which prohibits participants (generally large bullion banks and institutions with extremely experienced dealers) from countering the effects of large order imbalances with arbitrage. Regulators which prohibit these participants from arbitraging the imbalances were unable to foresee this as a consequence. Bottom line is that if you were a buyer today you were happy and if you were a seller today you got f*&@#d.
John Miles of the Zaner Group Brokerage Firm summarized what occurred:
It was a LMBA FIX issue. The silver fix is now called the LBMA Silver Price. The 6 banks that set the price are not allowed to lay off risk at COMEX or anywhere else so when there was a sell order inbalance this morning, the banks had to find a price level where they would buy that imbalance and that price level was much lower than the prevailing spot or futures price. So, once the LBMA Silver price was publicly announced at 6:15am today, the futures market immediately received a sell of ~ 5,000 silver futures contracts within a minute or two, thus we had a mini silver crash. If you have a minute, check your silver futures chart.
Image courtesy ZH:
And there you have it ladies and gents. 6 bullion banks dumped dumped over 25 million oz of paper silver on the market in under 90 seconds in order to set the London Silver Price 84 cents below the current silver spot.
Image courtesy Pining 4 the Fjords, TFMetals