Printed here with permission of course, Bart Chliton of the CFTC addresses the concerns myself and many others in the Silver community have had over the last several years. Ted Butler must be very excited, as am I!
Like you, I remain concerned about financial markets and how they have morphed. Massive passive traders (see my speeches if you’d like more on these) and the high frequency traders (those I call cheetahs, due to their speed) have at times moved markets in ways that I think nobody anticipated. Still, some disagree that they may have an impact. That is why, since 2008, I have supported the improvisation of mandatory position limits. They are the law of the land now and I am hopeful that my colleagues will agree that we need to implement them soon. In this regard, I am hopeful that we will approve such a position limit rule within the next 6-8 weeks. That doesn’t mean it will actually be implemented as you and I would like (it may not be effective for another few months). However, the passage of a position limit rule is a key step to actually having such limits implemented soon.
With regard to the cheetahs, I think they need to be tested, registered and potentially limited. On May 1st, as you know, the price of silver dropped 12% in 13 minutes on a Sunday evening in electronic trading. That certainly seems suspect. By the way, on June 7th in the evening, the price of natural gas dropped 7% in – get this – 14 seconds. Seconds! I mentioned to a reporter the other day that I think the cheetah trading is parasitical. I’m not sure of the value to the markets of such trading. I think when there is sparse liquidity (like on those two dates) that a cheetah or just a few other traders may be able to move markets significantly. I will continue to work on how to best handle this circumstance. The new financial reform law (Dodd Frank) does not require the agency to regulate the cheetahs, but here is an example where I believe the regulator needs to be proactive and do something positive.
Finally, I wanted to let you know that while I am disappointed in the pace of our silver investigation (as I said last October in a public statement), that it is still ongoing. I meet on silver regularly. A day does not pass when I don’t have a conversation about silver. If the agency does not say something publically by the third week of September, I will do so (yet again).That may not be a comfort to you, which is understandable, but I am doing what I can as one of five commissioners at the CFTC.
I did want to include the graph below showing the price of gold and silver. I thought you might be interested. Furthermore, this week’s Commitment of Traders data was just released – as of Tuesday, August 9, the four largest longs in COMEX silver (all futures and options combined) accounted for 16.1% of open interest, with the four largest shorts accounting for 30.4% of open interest. This data covers both commercial and non-commercial traders together. No longer do we see one trader with a huge concentrated short, although it does go over 10% of the open interest at times….why we need limits.
edit: Thank you staff at Gata for following this story : http://gata.org/node/10309
