Comex Rules

[Takachi]

picked this up off Kitco.com which was pulled from a post at USAGOLD.com. Very important to understand how the institutions will react in the ultimate crunch - good summary.

 

 

Thanks Black Blade

 

Rule Changes at the Commodities Exchanges

A Short History Lesson

 

In light of the increase in margin requirements for Gold futures trading I thought a little review of some history may be in order. Just replace ?Gold? for ?Palladium? and you may have an idea of how the commodities exchanges can ?rig? the game. The following is a repost from my 8/27/2000 view of crooked managers at the exchanges. Thanks to a former poster ?Netking? for finding this.

 

 

Death of a Rigged Metals Market ( usagold.com msg#: 35599 )

 

The Palladium markets have been under some very strange manipulations over the last several weeks. There is a very good chance that Palladium will be delisted or very severely restricted from futures trading in the near future. Much of this is a result of greedy unscrupulous and probable criminal actions of those that manage and oversee the commodities exchanges in Tokyo at the Tokyo Commodities Exchange ( TOCOM ) and the New York Metals Exchange ( NYMEX ) . The troubles began when more contracts for Palladium metal were sold than actual deliverable physical metal in the possession of certain counter-parties.

 

This story has its beginnings in the fall of the Soviet Union. First Russia is the source for about 70% of the worlds Palladium The Palladium is a by-product from nickel mining operations at Norilsk Nickel. Another simple fact is that the Russians have been in a very serious hard currency crunch since the collapse of the Soviet Empire. The Russians took out loans and issued worthless bonds for a few years as they struggled to dig their way out of over 70 years of government mismanagement under communist rule. The Russian Bond default almost brought world markets under severe pressure and many firms went under. However, these people in Russia had no experience with a free-market and still operated their economy under corrupt Soviet-style management practices, they over-taxed businesses, they stole foreign investment monies, and they even got into bed with Russian Organized Crime. Anything of value was looted by criminals and corrupted individuals, many of whom themselves are Russian Politicians or former Politburo members. In the resulting hard currency crunch as the worthless Russian bonds came due and were eventually defaulted on, there was a rush to shake down legitimate businesses through extortion and excessive taxation, to sell off former state-owned enterprises to corrupt cronies of Russian politicians for a pittance, and to loot hard assets including government stockpiles precious metals. The simple fact is that the PGM stockpiles of many years worth of mining are depleted. Any PGMs that are to be delivered will have to come from current mining production at Norilsk Nickel. A major problem at Norilsk Nickel as with most any enterprise in Russia is 1 ) that the operations are grossly inefficient and are in dire need of funds to upgrade operations to at least 20th century standards, and 2 ) the Russian workers don?t get paid on a regular basis which is not only bad for morale, but does not provide a lot of incentive for productivity. Unfortunately many businesses still try to run on the old Soviet model which simply does not work. In the old Soviet Union, workers were paid a set rate whether or not they were productive. In the real world, this does not provide an incentive to produce goods and services. No matter how you slice it, there is no sufficient supply of Russian Palladium coming to market.

 

The Russians tried to disguise this inefficiency by employing delaying tactics while in negotiations with the Japanese in talks earlier this year. Eventually the talks resulted in much higher prices for the Palladium contracts, yet supply has not reached the market in any meaningful quantity and is sporadic at best. Realizing the severity of the problem, many commodities investors in Japan bought heavily into the Palladium futures contracts. Like most any greedy and corrupt organization, the TOCOM generously wrote contracts for what was undeliverable metal without checking whether or not this commodity was even in existence. But greed is a powerful emotion and the TOCOM became a place of wild dealing and speculation. They thought that they could control the situation with numerous press releases and by setting "anal cysts" loose with erroneous information in an effort to deceive the market. Eventually this became a delaying tactic of choice as they searched for a way out of the developing short squeeze. Many who had actually believed the erroneous reports went short the Palladium market. The market was totally out of control. More and more press releases were set loose on the investment community that there were deliveries of Palladium on the way, and that they would arrive "any day" now. The situation was getting more critical almost on an hourly basis as it was beginning to become apparent that the metal was not coming to market. Soon many traders began to go long Palladium futures. The short squeeze was on! The TOCOM manipulators got caught with their pants down around their ankles and even with the risk of "losing face", they did the most dishonorable thing that they could. They defaulted on the Palladium contracts! In effect, they shut down the Palladium market. They forced the longs to settle at market in order to help bail out the shorts. The free-market in Palladium on the TOCOM was killed.

 

Now we move to New York were the last bastion of the "so-called" free-market in commodities is located in the form of the New York Metals Exchange ( NYMEX ) . Many commodities investors thought that at least in the USA there wouldn?t be such gross manipulation of the Palladium market. They were to be proven wrong. A short review of the Hunt Brothers and the Silver squeeze and the more recent settlement at market on the contracts during the developing short squeeze when the Washington Agreement was announced should have been a lesson learned. The corrupt managers of manipulative commodities exchanges such as the NYMEX change rules at will in order to manipulate the markets and to ultimately steal from honest believing investors. The latest manipulation in Palladium brings us to New York. In early August after the TOCOM had defaulted on Palladium futures contracts, the NYMEX realized that they too had a developing short squeeze in the works. What to do? Why not engineer a profit making scheme and manipulate the Palladium market at the same time? Hell, the CFTC is a toothless tiger, so why not? They didn?t investigate curious happenings in other metals markets, so the signal was given that the CFTC would not interfere.

 

In early August, the NYMEX imposed substantial margins on Palladium futures contracts. The result was to drive prices lower in a grossly obvious manipulation of the Palladium market. This caused many investors to quickly exit the market in order to lock in their profits. On August 14, the September Palladium contract fell as much as $60 per ounce. Now all exchanges require margin in order to cover the risk of losses, but in the Palladium market, this went beyond reality. Margins were raised six times in short order. On August 15th it was raised to $60,000 per contract, on August 16th it was raised to $80,000 per contract, and on August 17th it was raised yet again to $100,000 per contract! Of course the 100 ounce contract was only worth $74,000 per contract at that time. The manipulation scheme by the NYMEX criminals was on! The washout of certain investors was set with bogus excuses such as to "ensure an orderly market" - read "manipulated market". By the close of business on August 18th, the margin on contract had risen over the course of 10 days to $100,000 from $5,000 for clearing house members, to $110,000 from $5,000 for members, and to $135,000 from $6,750 for customers. Many had wondered how can a margin requirement be set for as much as 150% of the total contract value? This was unprecedented! They weren?t finished! They even had the gall to announce that margins would be raised further to $200,000 as if to tempt fate with the emasculated CFTC, however, this was eventually rescinded prior to implementation. I guess like all cocroaches, when the lights are turned on they scatter to the dark recesses to get out of under public scrutiny.

 

What was the NYMEX trying to do? The answer is obvious - manipulation, pure and simple! Open interest on outstanding contracts ( September ) had fallen from 852 to 783 contracts when the market opened after the announcement. Open interest in December futures increased to 1,234 contracts from 900 contracts, indicating that over 300 rollovers had taken place. Many angry market participants claim that this was the intention of the NYMEX manipulators. The NYMEX simply wanted to force as many players out of the market as possible before a truly powerful ( and profitable ) short squeeze began, or better yet, manipulate the price lower to bail out the shorts just like in Tokyo. Dishonor knows no nationality or culture it seems - crooks hang out in the same circles. The greed factor was at work in New York just as it was in Tokyo. There was not enough metal on hand and yet these NYMEX crooks sold more contracts for metal than existed. In fact, the entire warehouse stocks are only 150 contracts! The NYMEX-approved warehouses are located in New York and Wilmington, Del.

 

From my point of view, I think that this could be a contract killing situation for most Palladium market participants. However, those who hang on and take delivery may be in an excellent situation. The Russians cannot and will not deliver the metal in sufficient quantity as I have stated for months now. The actual price for the physical metal could far surpass the paper contract price. If only a few participants take delivery, the warehouses are bare. The Platinum metal supply situation is better, yet there are some supply problems here as well. As the industrial users of Palladium shift to Platinum and Rhodium, these prices are likely to come under increased pressure as well. Fortunately Platinum and Rhodium are a bit more available from sources outside of Russia such as South Africa, US, and Canada. The Palladium futures market was killed! There is now speculation that the Palladium market may simply be delisted. Can the same thing happen in other commodities? Obviously! It appears that manipulation in the Gold and Silver markets is an open secret. The CFTC has no compelling interest in performing their stated function of ensuring a free and fair commodities market. The moral of the story? Take possession of physical metal, invest in unhedged and profitable miners who have little or no debt, stay out of the rigged options and futures markets, and wait as the inevitable price increases occur. The death of the paper metals market is certain. The game is rigged.

 

- Black Blade

[MaxxPain]

I noticed goldmastersonline.com and tulving are selling 1 oz palladium bars. I ordered 10 oz just for kicks.

 

I don't think the increase in margin requirements in gold is cause for concern. They had to raise the margin because of increased price and volatility. Anyone that leveraged is asking for it.