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More Bad News for the LBMA Silver Price, but an Opportunity for Overhaul

On Friday 3 March 2017, in a surprise announcement with implications for the global silver market, the London Bullion Market Association (LBMA) informed its members that the current administrator and calculation agent of its recently launched LBMA Silver Price auction, Thomson Reuters and the CME Group respectively, will be pulling out of providing their services to the problematic London-based silver price benchmark within the near future. Thomson Reuters and the CME Group issued identical statements.

This is surprising because Thomson Reuters and the CME Group only began administering / calculating the LBMA Silver Price auction two and a half years ago in August 2014, when, amid much hubris, the duo were awarded the contract after a long-drawn-out and high-profile tender process. Notably, the Thomson Reuters  / CME contract with the LBMA was for a 5-year term running up to and into 2019. So the duo are now pulling out mid-way through a contract cycle.

More surprisingly, in their statements of 3 March, the LBMA / Thomson Reuters and CME allude to the European Benchmark Regulation being in some way responsible for the hasty departure. However, given that the units of CME and Thomson Reuters that are parties to the LBMA contract are their specialist benchmark units “CME Benchmark Europe Limited” and “Thomson Reuters Benchmark Services Limited”, which specialise in administering and calculating benchmarks, this excuse makes no sense.

In essence, this development is an embarrassment for all concerned and could lead to further reputational damage for the parties involved. It also now re-focuses market scrutiny on an area which the LBMA and its associates could well wish to forget, i.e. the former London silver fixing run by the infamous London Silver Market Fixing Limited, a company which itself is still one of the defendants, along with HSBC, Bank of Nova Scotia and Deutsche Bank, in a live New York class action suit that is scrutinizing the manipulation of the London silver price.

LBMA Silver Price: A Regulated Benchmark

Note that the LBMA Silver Price benchmark is now a “Regulated Benchmark” under United Kingdom HM Treasury Legislation, and is one of 8 financial market benchmarks regulated by the UK’s Financial Conduct Authority (FCA). So this is not some backwater obscure benchmark that we are talking about here. This is a benchmark with far-reaching effects on the global precious metals markets and a sister of the LBMA Gold Price benchmark. The reference prices from these benchmarks are used from everything from valuing Exchange Traded Funds (ETFs) to being the price reference points in ISDA swaps and bullion bank structured products such as barrier options.

According to the LBMA’s usual public relations mouthpiece Reuters, which relayed the news to the broader market on 3 March, the LBMA will be:

“looking to identify a new provider in the summer, and have the new platform up and running in the autumn”

This dramatic “exit stage right” by Thomson Reuters and the CME Group is a far cry from their initial and continued corporate spin of being committed to the silver price auction, which they claimed both at auction launch in August 2014, and also as recently as 2016 when they grovelled with promises of process improvement and wider participation in the auction in the wake of the silver price manipulation fiasco in the LBMA Silver Price auction on 28 January 2016.

It was on 28 january 2016 that the midday auction took a whopping 29 rounds to complete and the price derived in the auction was manipulated down by a massive 6% under where silver spot and silver futures prices were trading at that time. See the beginning of BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing” for further details about the 28 January auction.

TRCMEsquare

 

Where is the Commitment?

On 15 August 2014, the day the LBMA Silver Price auction was launched, William Knottenbelt, MD at CME Group stated:

“Through our existing relationships with market participants and the broader silver marketplace we are uniquely positioned to provide a seamless transition for the spot silver benchmark in London.” 

“CME Group has a long and successful history of offering benchmark risk management and price discovery solutions for the global precious metals markets.” 

Then, on 22 March 2016, when CME and Thomson Reuters introduced some changes to the auction in the wake of the 28 January 2016 auction price manipulation, both parties released more spin on their continued commitment to the auction. Thomson Reuters’ Head of Benchmark Services, Tobias Sproehnle, in a statement that now looks to be hollow, said:

“these changes together with a comprehensive consultation with the broader silver community – producers, intermediaries and consumers - are a further demonstration of Thomson Reuters and CME Group’s commitment to providing innovative, market leading benchmarks for the Silver market.

While Gavin Lee, the head of CME Benchmark Services, led with an equally hubristic statement that:

“in consultation with Silver market participants, we are always looking for new ways to develop this benchmark further

These statements from CME and Thomson Reuters, less than a year ago, run totally contrary to the fact that the duo are now going to abandon the LBMA Silver Price auction ship, which will necessitate the appointment of a replacement administrator and calculation agent. Where is the continued “commitment” to the silver benchmark and the silver market that they were we eager to espouse last March?

Why the Hasty Departure?

According to the Reuters news report last Friday 3 March:

A spokesman for Thomson Reuters confirmed the company was stepping down from the process. CME could not immediately be reached for comment.

Not very informative or cooperative from either party when one of the providers was not even available to explain its exit rationale, and the other merely confirms a fact to its in-house news arm, a fact which the LBMA had already announced earlier that day to its members.

However, if you look at the CME Group website, a short announcement was added to its website on 3 March 2017, which states:

The forthcoming European Benchmark Regulation, due to be implemented in January 2018, prompted a review of the existing LBMA Silver Price administration arrangements and, in consultation with the LBMA, CME Group and Thomson Reuters have decided to step down from their respective roles in relation to the LBMA Silver Price auction.

This statement was also added to the Thomson Reuters website on 3 March.

Before briefly looking at the relevance of this “European Benchmark Regulation”, which the Reuters news article even failed to mention, its notable that the CME / Thomson Reuters early withdrawal was also covered on 3 March by the MetalBulletin website.

According to MetalBulletin (subscription site), the above statement by CME is apparently part of an identical statement which the LBMA released to it members on Friday 3 March (the LBMA statement).

MetalBulletin adds in its commentary that:

“CME is looking to streamline its precious metals division, with contracts in this area being its fastest growing asset. The exchange wants to focus on its core products, Metal Bulletin understands.”

What MetalBulletin means by this I don’t know. The logic doesn’t make any sense. The sentence doesn’t even make sense. Benchmarks are a core product of CME group. CME even states that it offers:

“the widest range of global benchmark products across all major asset classes”

CME Benchmark Europe Limited was specifically set up in 2014 to provide the calculation platform for the LBMA Silver Price. Furthermore, CME has just launched a suite of silver and gold futures contracts for the London market (launched in late January 2017), the silver contract being the “London Spot Silver Futures (code SSP)“. Even though these CME contracts have had no trading interest so far, the CME claims that it is currently “working with major banks to synchronize their systems to start trading” these contracts (London Spot Silver Futures and London Spot Gold Futures).

So why would CME want to voluntarily ditch the provision of a high-profile London silver benchmark, when it could attain trading synergies between the LBMA Silver Price and its new London silver futures contracts, or at the very least improve brand recognition in the market?  And not to forget CME and Thomson Reuters claim a”commitment to providing innovative, market leading benchmarks for the Silver market“.

European Benchmark Regulation

Turning to the new “European Benchmark Regulation”, what exactly is it, and why would it be relevant for the LBMA and CME and Thomson Reuters to mention the European benchmark Regulation in the context CME and Thomson Reuters pulling out of the LBMA Silver Price auction?

At its outset, the European Benchmark Regulation was proposed by the European Commission. The Commission’s proposal was also issued in coordination with a range of entities and initiatives such as MiFID, the Market Abuse Directive, the benchmark setting processes of the  European Securities and Markets Authority (ESMA) and European Banking Authority (EBA), and also the IOSCO financial benchmark principles.

According to law firm Clifford Chance:

The new [EU] Regulation is a key part of the EU’s response to the LIBOR scandal and
the allegations of manipulation of foreign exchange and commodity benchmarks

“The Regulation imposes new requirements on firms that provide, contribute to or use a wide range of interest rate, currency, securities, commodity and other indices and reference prices.”

“Most of the new rules will not apply until 1 January 2018″

“The new Regulation imposes broad ranging and exacting requirements
on a wide range of market participants. It may reinforce the trend to discontinue benchmarks and reference prices

According to law firm Simmons & Simmons:

The Regulation seeks to:

  • improve governance and controls over the benchmark process, in particular to ensure that administrators avoid conflicts of interest, or at least manage them adequately
  • improve the quality of input data and methodologies used by benchmark administrators
  • ensure that contributors to benchmarks and the data they provide are subject to adequate controls, in particular to avoid conflicts of interest
  • protect consumers and investors through greater transparency and adequate rights of redress.

The Regulation aims to address potential issues at each stage of the benchmark process and will apply in respect of:

  • the provision of benchmarks
  • the contribution of input data to a benchmark, and
  • the use of a benchmark within the EU.

All of these goals aspired to by the legislation of the European Benchmark Regulation seem reasonable and would benefit users of the LBMA Silver Price auction, so given the above, it seems very bizarre that CME and Thomson Reuters and the LBMA stated last Friday 3 March that:

The forthcoming European Benchmark Regulation, due to be implemented in January 2018, prompted a review of the existing LBMA Silver Price administration arrangements

Remember that the CME and Thomson Reuters service providers to the LBMA Silver Price are their specialist benchmark units “CME Benchmark Europe Limited” and “Thomson Reuters Benchmark Services Limited”. That is what these units do, administer and calculate benchmarks. This European benchmark Regulation has been known about for a few years. Especially known about by the benchmark units of CME and Thomson Reuters. The Regulation didn’t suddenly appear out of nowhere last week, as the above statement is appearing to hint at.

And why such a brief and unclear statement from CME, Thomson Reuters and the LBMA? Is this European Benchmark Regulation just an excuse being thrown out to distract from other issues that might really be behind CME and Thomson Reuters stepping down.

Or perhaps CME and Thomson Reuters are aware of issues within the current administration of the LBMA Silver Price that would make it difficult to comply with the new legislation or that would make it too onerous to comply? But such rationale doesn’t make sense either because why are CME and Thomson Reuters not bailing out of the all the benchmarks that they are involved in? Furthermore, if the European Benchmark Regulation is a factor, why would any other benchmark service provider such as ICE Benchmark Administration (IBA) bother to pitch in the LBMA’s forthcoming tender process to find a replacement for Thomson Reuters and CME?

Perhaps CME and Thomson Reuters are worried about future reputation damage of being associated with the LBMA Silver Price due to some brewing scandal? Or perhaps the powerful bullion banks within the LBMA wanted to scupper any change that there will ever be wider participation or central clearing in any future version of the auction?

I will leave it to readers to do their own research on this and draw their own conclusions.

A Banking Cartel vs. Wider Auction Participation

One issue which has dogged the LBMA Silver Price auction since launch is that it never gained any level of “wider participation” or market representative participation. There are only 7 bullion banks authorised by the LBMA to be direct participants in the auction, and there are zero direct participants from the silver mining, silver refineries, and silver sectors.

This is despite the LBMA, CME and Thomson Reuters all misleading the global silver market on this issue on many occasions, and claiming that there would be very wide participation in the auction after it was launched. See BullionStar blog “The LBMA Silver Price – Broken Promises on Wider Participation and Central Clearing” for a huge amount of factual evidence to back up this statement, including webcasts by CME, Thomson Reuters and the LBMA, and an interview by Reuters with LBMA consultant Jonathan Spall, formerly of Barclays. Here are a few examples:

The LBMA’s Ruth Crowell was claiming back in July and August 2014 that they were interested in having 111 direct participants:

“clear demand for increased direct participation, and we had 25% of those 444 coming back saying they would be interested, and we’re still interested in having all of those participants on board”

“The advantage with centralised clearing, particularly for the pricing mechanism, is that we can really exponentially grow the amount of direct participants

Jonathan Spall, LBMA Consultant stated that:

“The hope of course is that we get many more participants in the new benchmark process….while it is likely that we will start by having banks involved it is ultimately hoped that the wider market will participate, be they refiners, miners etc.

“Ultimately – and as I said before – the intention is that there is much wider participation. So yes, refiners, miners etc.

Harriett Hunnable, then of the CME Group, stated:

“So this is really the new world, this is not the old fixing…..this is wider participation…and the London bullion market is really encouraging that…this is the new world, or the LBMA Silver Price!”.

According to the CME / LBMA / Thomson Reuters presentations, there was supposed to be a “phase 3 introduction of centralised clearing

Central counterparty clearing will enable greater direct participation in the London Silver Price

In summary, central clearing would allow direct participants to participate directly in the auction without the need for bi-lateral credit lines. However, the plan for central clearing was quietly dropped. The CME and Thomson Reuters have now had 32 months in which to introduce central clearing into the silver auction and it hasn’t happened. Nor will it now. The fact of the matter is that the LBMA banks do not want wider participation and they don’t want central clearing of auction trades either. These banks, which at the end of the day are just costly intermediaries, essentially want to monopolise the silver auction and prevent wider participation, and prevent true silver price discovery. Could it be the banks through their LBMA front that have sabotaged the contract with CME and Thomson Reuters so as to reset the contract and re-start another tender process that will ensure that no wider participation can ever see the light of day?

It’s also important to note that there is no way for miners and refiners to be direct participants in the auction. This is because the LBMA has designed the auction participant rules to keep out refiners and miners (and anyone else that is not a bullion bank). The rules are specifically designed so that only bullion banks can satisfy the LBMA’s Benchmark Participant criteria. See section 3.13 of the LBMA Silver Price auction methodology document accessible here.

Currently only 7 bullion banks are direct participants in the auction, namely HSBC, JPMorgan Chase, Bank of Nova Scotia (ScotiaMocatta), Toronto Dominion, UBS, Morgan Stanley, and China Construction Bank.  Most of these banks are very influential on the LBMA Management Committee. HSBC, Scotia and Mitsui were in the auction from Day 1 on 15 August 2014. UBS joined the auction on 26 September 2014, JP Morgan Chase Bank joined on 14 October 2014, Toronto Dominion Bank joined on 6 November 2014. Mitsui left in either late 2015 or January 2016 (the exact date is unclear). China Construction Bank only joined the auction on 6 May 2016.

Lastly, Morgan Stanley only joined the LBMA Silver Price auction on 25 October 2016 (which is just 4 months ago), at which point the LBMA / CME and Thomson Reuters had the audacity to spin that 7 LBMA bullion banks trading in a shadowy auction of unallocated silver accounts in London somehow represents the global silver market:

CME: “The addition of another member brings greater depth and diversity to the market and underlines the ongoing globalisation of the Silver Price as a leading, liquid precious metals benchmark.”

Thomson Reuters: “With the addition of Morgan Stanley to the panel, the LBMA Silver Price provides even deeper insight into the global silver market. We continue to welcome new participants to this essential mechanism for the markets.”

LBMA: “They [Morgan Stanley] add depth and liquidity to the auction and I look forward to other market participants joining in the future.”

LBMA Silver Price is NOT Representative of Silver Market

But, to reiterate (and as was stated previously in this blog), the LBMA Silver Price auction is not representative of the global Silver Market whatsoever, and it does not meet some of the simplest IOSCO benchmark requirements:

“IOSCO benchmark principles state that a benchmark should be a reliable representation of interest, i.e. that it should be representative of the market it is trying to measure. Interest is measured on metrics such as market concentration. In the Thomson Reuters methodology document (linked above), on page 11 under benchmark design principles, the authors estimate that there are 500-1000 active trading entities in the global silver market.”

The Thomson Reuters methodology document from August 2014 also admitted that “volumes in the LBMA Silver Price are a fraction of the daily volume traded in the silver futures and OTC markets”.

Why then are 7 LBMA bullion banks allowed to monopolize the representation of 500 – 1000 active trading entities from the global silver market within the auction, an auction that its worth remembering generates a silver reference price which is used as a global silver price reference and pricing source?

BullionStar investment silver bars and coins

Refiners and Miners

Based on the current rules, the vast majority of the world’s silver refiners cannot directly take part in the LBMA Silver Price auction.

Only 8 precious metals refiners are Full Members of the LBMA while 25 refiners are associates of the LBMA. Of the 8 full members, 5 of these refiners are on the LBMA refiner Referee panel, namely, Argor-heraeus, Metalor and PAMP from Switzerland, Rand Refinery from South Africa, and Tanaka Kikinzoki Kogyo from Japan. These refiners were added to the panel as LBMA Associates in 2003, and were only made Full Members in 2012. The only reason they happened to be fast-tracked as full members of the LBMA was due to their status as Referees for the LBMA good delivery list. Even the other major Swiss based refinery Valcambi is still not a full member of the LBMA.

Based on the current participant criteria of the Silver auction, where only full LBMA members could conceivably become direct participants, 25 of the refiners that are LBMA Associates cannot directly take part in the auction even if they wanted to. Candidates for Full LBMA Membership also have to jump through a number of hoops based on sponsorship by existing members, business relationships, due diligence, and involvement in the precious metals markets.

For a refiner to even become a LBMA associate, the refiner must have already attained Good Delivery Status for its silver or gold bars. There are about 80 refineries on the LBMA’s current Good Delivery List for silver. The chance of the vast majority of these refiners taking part in the LBMA silver auction is nil since not only are they not LBMA full members, they aren’t even LBMA associates.

Based on the current auction criteria, it’s without doubt literally impossible for nearly all silver producers / miners on the planet to directly participate in the LBMA Silver Price auction. Precious metal mining companies are not normally officially connected to the LBMA, and would more naturally be members of the Silver Institute or World Gold Council or another mining sector organization. So it’s confusing as to why the LBMA even mentions mining companies as possible auction participants since there are no mining companies that are Full Members of the LBMA, so they cannot be participants in the silver auction. The only mining companies that are even “Associates” of the LBMA are Anglogold Ashanti and Coeur Mining.

In 2014, Coeur Mining’s treasurer, referring to the LBMA Silver auction said:

“We hope to have the opportunity to become a direct participant down the road and look forward to working with the LBMA, CME and other silver producers to drive the evolution of this market.”

The unfortunate Coeur Mining now looks like it has been strung along by the LBMA with empty promises that it can somehow someday participate in the silver auction, but this is literally a fiction given the way the auction rules are currently set up.

Conclusion

In its announcement on 3 March, the LBMA said that it will shortly launch a tender process to appoint a replacement provider. The LBMA told Reuters News:

“We would be looking to identify a new provider in the summer, and have the new platform up and running in the autumn”

However, given the abysmal track record of the LBMA Silver Price, the question that should really be asked at this time is why is the bullion bank controlled LBMA even allowed to be in charge of such an important “Regulated Benchmark” as a global silver price benchmark, a benchmark that has far-reaching effects on global buyers and sellers of silver.

Take a brief look back at how the last tender process run by the LBMA for the London silver price was handled.

A Silver Price Seminar held by the LBMA on 19 June 2014 was not even open to the wider bullion market. As Ruth Crowell, CEO of the LBMA, told the publication MetalBulletin in an October 2014 interview:

“Not just our members, but ISDA members, and any legitimate members of the market were invited to the seminar. We also had observers from the FCA and the Bank of England. We wanted to keep [attendance] as wide-ranging as possible but to avoid anyone who perhaps would be disruptive

What is this supposed to mean? To prevent anyone attending the seminar who might have a different view on how the global silver price benchmark should be operated that doesn’t align with the view of the LBMA?

The actual process of selecting the winning bid from the shortlist of tender applicants was only open to LBMA Full members and Seminar attendees via a 2nd round voting survey. The independent consultant review that was part of the selection process, was conducted by someone, Jonathan Spall, who was not independent of the former fixings and so should not have been involved in the process.

Promises of wider participation involving refiners and miners were abandoned. Promises of central clearing of auction traded were thrown out the window. Prior to launch, the auction platform was hastily built by Thomson Reuters and CME without an adequate market-wide solution for clearing silver trades. Another of the bidders, Autilla/LME, had a working auction solution which would have allowed wider market participation at August 15 2014 go-live, but this solution was rejected by the LBMA Management Committee, LBMA Market Makers and the LBMA Data Working Group, the groups which had the ultimate say in which applicant won the tender.

There were only 3 participants in the LBMA Silver Price auction (all of them banks) when it was launched in August 2014, and two of which, HSBC and Scotia, were parties to the former London Silver Fixing. The LBMA Silver Price auction was therefore an example of same old wine in a new bottle. The same 2 banks, HSBC and Scotia are now defendants in a silver price manipulation class action suit in New York. There are now only 7 direct participants in the LBMA Silver Price. These are all bullion banks. This is 32 months after the auction has been launched. The LBMA accreditation process specifically prevents refiners and miners from joining the auction. As there are 500 – 1000 trading entities of silver globally, the LBMA Silver Price mechanism is totally unrepresentative of the silver market.

The defection of CME and Thomson Reuters now provides a one-off opportunity for the global silver market to insist that the current scandal ridden current auction be scrapped and taken out of the hands of the bullion bank controlled London Bullion Market Association (LBMA). It is also an opportunity to introduce a proper silver price auction in its place that is structured to allow direct participation by hundreds of silver trading entities such as the world’s silver refiners and miners, an auction that employs central clearing to allow this wider participation, and an auction that is based on trading real physical silver and not the paper credits representing unallocated claims that the participating London bullion banks shunt around between themselves. This could help lead to real silver price discovery in the global silver market. However, the chances of this happening with the LBMA still involved in the new tender process are nil.

Guest Post: How to Trigger a Silver Avalanche by a Pebble: “Smash(ed) it Good”

UBS and other precious metals traders on how to wreak havoc in silver markets

Written by Allan Flynn, specialist researcher in aspects of gold and silver.

avalanche

“An avalanche can be triggered by a pebble if you get the timing right” 

Earlier this year at April’s hearings for London Silver and Gold Fix lawsuits, the judge and defendant’s attorney quipped about trader chats named “the mafia” and “the bandits” published in prosecutors findings of Forex investigations but conspicuously absent from precious metals investigation findings, and the silver and gold antitrust lawsuits under consideration.

THE COURT: “Those were bad facts for the defendants.”

LACOVARA: “I think, your Honor, that if we had chat rooms that said “The Cartel”, we might be having a different focus to oral argument today.”

THE COURT: “I think that is correct.”

Given the judges skepticism of the allegations described in an earlier article, it came as a surprise early October when the banks listed were ordered by magistrate Valerie E. Caproni to face charges. More surprising perhaps was the exemption granted Swiss bank UBS, which despite having been found guilty and fined for “precious metals misconduct” by the Swiss Financial Market Supervisory Authority FINMA in November 2014, was granted motion to dismiss from both silver and gold lawsuits.

All that may be about to change according to documents filed in a New York district court December 7th, where plaintiffs claim that transcripts showing conspiracy to manipulate silver, provided by Deutsche Bank as part of an April settlement agreement, includes extensive smoking gun evidence involving UBS and other banks. Plaintiffs describe a “multi-year, well-coordinated and wide-ranging conspiracy to rig the prices of silver and silver financial instruments that far surpasses” that of the previous complaint, including potentially incriminating evidence of UBS precious metals traders allegedly conspiring with other banks.

Five additional banks to the remaining defendants HSBC and Bank of Nova Scotia are mentioned including Barclays Bank, BNP Paribas, Standard Chartered Bank, Bank of America and Merrill Lynch. The Memorandum of Law signed by Vincent Briganti on behalf of Lowey Dannenberg Cohen & Hart for plaintiffs on Wednesday 7th December seeks leave to amend the existing complaint filed with the United States District Court Southern District of New York.

Included in the memo are numerous astounding transcripts indicating coordination between UBS and other banks of “pushing,” ”smashing,” ”bending,” ”hammering,” ”blading,” ”muscling,” and “ramping” the prices of silver and silver financial instruments.

In support of claims of conspiracy to manipulate the price of silver downward the following gem is attributed to UBS Trader A: “so we both went short” “f*cking hell it just kept going higher” “63,65, then my guy falls asleep, it goes to 69 paid!” “then finally another reinforcement came in.

Discussions supposedly of coordination between UBS and their competitors about fixing the price of physical silver by offering only wide spreads between the bid and ask (where a “lac” is reference to an Indian measure equaling 100,000 units) go like this:

UBS Trader B: “what did u quote let me check”

Deutsche Bank Silver Fix Trader-Submitter A: “44/49”

UBS Trader A: “just quote wider if they call me in 1 lac I will quote 7-8 cents”

Deutsche Bank Trader B: “how wide u making 1 lac today 5 cents?”

UBS Trader A: “silver actually steadier than gold i would make 5-6 cents wide in silver”

UBS Trader A: how wide would you quote 5 lacs silver?”

Deutsche Bank Trader B: “10cu>?”

Deutsche Bank Trader B:”how wide u quote for 3 lacs?”

UBS Trader A: 10 cents”).

Manipulation of the Silver Fix price to benefit their silver trading positions in derivatives by UBS is claimed in the following exchanges:

Deutsche Bank Trader B: “u guys short some funky options” “well you told me to no one u just said you sold on fix”

UBS Trader A: “we smashed it good.”

Deutsche Bank Silver Fix Trader-Submitter A: “UBS boring the market again”…”just like them to bid it up before the fix then go in as a seller…they sell to try and push it back.”

It’s further alleged by plaintiffs that UBS implemented an “11 oclock rule” where both UBS and Deutsche Bank would short silver at 11A.M.

As examples of the comparative ease by which UBS moved the silver market the memo reveals Deutsche Bank Trader B added UBS Trader A to a chat with HSBC Trader B, which UBS Trader A deemed “the mother of all chats,” and leading to the trader’s own analysis:

UBS Trader A to Deutsche Bank Trader B: “if we are correct and do it together, we screw other people harder”

UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”, and in reference to UBS supposed manipulative influence by an unnamed party: “u guys WERE THE SILVER MKT.”

hobo

UBS intended to reap financial rewards by manipulation of the price of physical silver and associated financial instruments, the memo says as UBS Trader A suggested: “go make your millions now jedi master…”pls write me a check when u aer a billionare,” and “i teach u a fun trick with silver” to which Deutsche Bank Trader B replied: “show me the money.

Confident of their ability to manipulate UBS made bold predictions according to the following alleged extracts:

UBS Trader A: “gonna bend this silver lower”; “i will bend it lower told u”; ”hah cool its gonna get ugly”; “use the blade on silver rg tnow it’ll hold it up,

Deutsche Bank Trader B: “yeah,

UBS Trader A: “gona blade silver now.

Of course all the secrecy in the world about the operations was required of the chat groups by UBS Trader A stating: “pls keep all these trick to yourself,” “btw keep it to yourself…,” and “ok rule of thumb EVERYTHING here stays here.

Examples of other banks alleged transcripts are included in the following:

Barclays

Deutsche Bank Trader B instructing Barclays trader A: “today u smash,

Barclays Trader A: “yeah” and “10k silver” “im short.

It’s alleged that Barclays and Deutsche Bank shared information so often that Barclays Trader A remarked “we are one team one dream.”

Materials in the memo even include the Deutsche Bank and Barclays precious metals traders agreeing at one stage to “stay away” from silver for a week.

The traders of course knew it was terribly wrong with Barclays Trader A responding to Deutsche Bank’s Trader B instruction to “push silver”: “HAHAHA lol i don’t think this is politically correct leh on chat.

Merrill Lynch

Allegedly fixing the bid-ask spread they offered clients on silver:

Merrill Lynch Trader A: “How wide r u on spot? Id assume 10 cents for a few lacs?

Deutsche Bank Silver Fix Trade-Submitter A: “im getting ntg but stops”

…Merrill Lynch Trader A: “we had similar” “I sweep them…Fuk these guys.

Showing disregard to global regulators even after noting their activities the two continued to “sweep” the silver market, allegedly observing at one stage: “Someone got stopped messily.

smash

BNP Paribas Fortis

Fortis Bank Trader B allegedly conspired with Deutsche Bank to manipulate silver prices, using what he termed a “bulldozer” on the silver market.

Standard Chartered

Conversations between Deutsche Bank Silver Fix Trade-Submitter A and Standard Chartered Trader A as follows:

 “Yeh” “small long out of the fix…” “ok where to sell sivler then?

23.40 thru that use it as a stop profit and let it runnnnnnnnnnnnn

were on the same wavelength

im long silver”…”ilke both [silver and gold] to get the absolute sht squeezed out of them” “im longer silver than i am gold

Conclusion

Assuming the transcripts submitted are accepted and plaintiffs are permitted to file their Third Amended Complaint, the possible pending “avalanche” of settlements in silver lawsuits will speak volumes for the investigative prowess of the CFTC and the DOJ, both of which were commissioned to investigate long running allegations of silver and precious metals market manipulation over recent years, and came up completely empty.

It appears Judge Caproni, former FBI General Counsel, was on the money when considering the potential of ineptitude in government investigations of precious metals markets at April’s gold hearing: “I don’t put a lot of stock in the fact that there are investigations because I was a government lawyer for a long time and I know what you need to open an investigation. By the same token, the fact that they closed it without charging anybody doesn’t mean that everybody is innocent. So I don’t put a lot of stock in it one way or the other.”

The CFTC proudly announced in September 2013 they had spent five years and seven thousand enforcement hours investigating complaints of manipulation in the silver market, including with assistance by the Commission’s Division of Market Oversight, the Commission’s Office of Chief Economist, and outside experts, but yet found nothing.

The Department of Justice Antitrust Division which were so confident of their investigation of collusion in precious metals they went to the extraordinary lengths in January of this year of providing a letter to silver and gold lawsuit defendants advising they had closed their investigation without findings of wrongdoing.

The Swiss Financial Services watchdog FINMA investigated, published and prosecuted UBS for forex and precious metals trading misconduct but yet said so little about precious metals findings in their November 2014 investigation report, it was impossible for the court to withstand UBS motion to dismiss in both metals.

And finally of the ability of authorities to reign in rogue banks in the precious metals or any other markets, the memorandum flags a fact that should draw the attention of those trying to figure out if they can indeed trust that their bullion bank has their best interests at heart simply by banning participation in trader chat rooms.

“The chats contained in the DB material are just the tip of the iceberg, as evidence suggests that Defendants intentionally communicated in undocumented ways to keep their manipulation hidden.”

For example the memo includes the salient reminder that banks will always find a way “to evade detection,” in this case where two traders are described as also communicating “via email and personal cell phone.”

The above article was first published at Allan Flynn’s website here.

Allan Flynn is a specialist researcher in aspects of gold and silver. He is currently investigating for future publication on the same topic and works in property and commercial architecture when he needs to eat. He holds shares in precious metals producers and banks.

 

Austrian Mint sells 41 tonnes of gold coins and gold bars in 2015

Earlier this year, the director of marketing and sales at the Austrian Mint confirmed to Bloomberg in an interview that the Mint’s combined gold bar and gold coin sales in 2015 had totalled 1.32 million troy ounces, a 45% increase on 2014, while the Mint’s silver sales in 2015 had reached 7.3 million ounces, a figure 58% higher than in 2014.

Since Münze Österreich, or the Austrian Mint in English, only publishes its annual report in July of each year, we had to wait a few months to see the granular details behind these sales numbers. Now that the Austrian Mint’s 2015 Annual Report has been published, the detailed sales figures are as follows.

Gold Philharmonics – 23.5 tonnes

In 2015, the Austrian Mint sold 756,200 troy ounces (23.52 tonnes) of Vienna Philharmonic gold coins, of which 647,100 troy ounces (20.18 tonnes) were in the form of its flagship 1 oz Vienna Philharmonics, with the remainder comprising ½ oz, ¼ oz, 1/10 oz and 1/25 oz gold Philharmonic coins, as well as a handful of the Mint’s very large 20 oz gold Philharmonics. Gold Philharmonic sales in 2015 were 56% higher than comparable sales of 483,700 ozs in 2014, and were also higher than 2013’s figure of 652,600 ozs.

Vienna coins
Sales of the Vienna Mint’s flagship 1 oz gold Philharmonic accounted for the lion’s share of gold coin sales

Philharmonic gold coin sales in 2015 were the third best year on record, just slightly lower than 2008’s total sales of 795,000 ozs, but still well short of 2009’s bumper sales total of 1,036,000 ozs, when that year’s finanical crisis was in full flight.

Aus AU Phil
Source: www.goldchartsrus.com

Gold Bars – 16.3 tonnes

Turning to gold bars, the Mint sold 524,722 troy ounces (16.32 tonnes) of its branded gold bars in 2015, over half of which comprised sales of 1 kg, 500 gram and 250 gram gold bars. The 2015 gold bar sales were nearly 28% higher than 2014 gold bar sales of 410,300 ozs, but slightly less than 2013’s comparable sales of  711,200 ozs.

Vienna bars
The Mint’s larger bars were the most popular in terms of total gold output

In addition to gold Philharmonic coins and gold bars, the Austrian Mint also produces a series of historic re-strikes of original Austrian circulation gold coins in the form of gold ducats, gold guilders and gold crowns. In 2015, sales of these gold re-strike coins, mostly ducats, accounted for 37,700 troy ounces of gold (1.17 tonnes), which was a 128% increase on the previous year’s sales of 16,500 ozs.

Overall, in 2015, the Austrian Mint sold gold coins (Philharmonics and historic coins) and gold bars containing 1,318,700 ozs (41 tonnes) of gold. In 2015, the gold Vienna Philharmonic’s largest markets were Europe followed by Japan and North America, and notably the gold Philharmonic was the best-selling major gold bullion coin in both the European and the Japanese markets.

Aus AU
Source: www.goldchartsrus.com

Looking at the long-term chart above, you can see that total gold sales (by volume) at the Austrian Mint during 2015 were noticeably higher than in 2014 and approached the gold sales figures of 2013, however they were still below the multi-year high sales figures from 2008, 2009 and 2011. Notice also that for the last 8 years there has been a trend of the Austrian Mint’s gold sales following a high one year, lower the next year pattern, possibly due to risk on / risk off sentiment among gold investors depending on how the general financial markets were performing.

Silver Philharmonics – Strong North American sales

As the Austrian Mint does not fabricate silver bars, the Mint’s silver bullion sales are exclusively from the silver coins it produces, specifically the 1 ounce silver Vienna Philharmonic coin. In 2015, the Mint sold 7.3 million silver bullion coins containing 227 tonnes of silver. The largest markets for the Mint’s silver coin sales in 2015 were North America, followed by Europe. Silver sales in 2015 were also notable in that it was the first time that the Mint’s silver coins sales in the North American market surpassed those in Europe. Looking at a long-term chart of Austrian Mint silver sales, you can see that 2015 was a year of recovery following relatively low sales in 2014, which was partially due to an increase in VAT on silver sales in Germany in 2014.

Aus AG
Source: www.goldshartsrus.com

The Mint’s silver coin range also includes historic re-strikes of a Maria Theresa Taler coin in uncirculated and proof editions. These coins contain 23.39 grams of pure silver (approximately 0.2 tonnes). These coin sales are classified separately from silver bullion coin sales and their sales are quite minimal. In 2015, sales of these Taler coins reached 9,777 pieces, slightly down on 2014’s sales of 11,470 pieces.

Gold Bullion Sales Drove Total Revenues

In terms of Austrian Mint revenues, gold bullion coins (gold Philharmonics) generated revenues of  €788.9 million in 2015, up 70% on 2014’s €464.2 million. Gold Philharmonics were also 48.5% of total Mint revenues in 2015. Gold bar revenues of €547.3 million were 40% higher than in 2014, and accounted for another 34% of all Mint revenues. Silver coin sales in 2015 reached €111.3 million, 58% higher than in 2014. Adding revenues from gold coin re-strikes of €40.4 million, the total revenues from gold and silver coin products reached €1.37 billion, which was 84.7% of total Mint revenues for 2015.

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Gold coin and gold bar revenues account for over 80% of  the Mint’s total revenues

In terms of revenues, annual gold sales at the Austrian Mint are far higher than its silver sales. In volume terms, the Austrian Mint also produces more gold products than its counterparts but far less silver products than its counterparts. So the Austrian Mint could be said to be a gold specialist.

For example, in 2015, and just looking at bullion coin sales, the US Mint sold gold bullion coins (American Eagles and American Buffalos) containing 31.8 tonnes of gold, but silver bullion coins (predominantly American Eagles) containing 1,495 tonnes of silver. Likewise, in 2015, the Royal Canadian Mint sold gold bullion coins (gold Maple Leafs) containing 29.6 tonnes of gold, and silver bullion coins (silver Maple Leafs) containing 1067 tonnes of silver.

Based on 2015 volumes sold of 227 tonnes of silver coins and 24.69 tonnes of gold coins, the Austrian Mint had a silver coin sales to gold coin sales ratio of only 9.19, whereas comparable ratios for the US Mint and Royal Canadian Mint were 47 and 36, respectively.

Non-bullion revenue at the Austrian Mint is generated by activities such as producing Euro circulation coins, and producing semi-finished products and medals. Non-bullion revenues accounted for €248 million or approximately 15% of total Mint revenues during 2015. Interestingly though, although the Mint does not report the geographic origin of its revenues on a segmented basis, it does report the share of revenue derived in Austria vs derived outside Austria. For 2015, €1.258 billion in revenue was generated in Austria vs €360.6 million internationally, meaning that international markets contributed only 22.3% of Mint revenues.

Therefore, the domestic Austrian market is still the Mint’s primary market in terms of bullion sales. In one way this is not surprising because the Austrian population has a very strong appetite for gold coin and gold bar products, especially gold products from the Austrian Mint in Vienna. The Mint’s gold coins and bars are sold widely throughout Austria in banks such as Bank Austria, the Raiffeisen banks, the Steiermärkische Sparkasse savings banks and through the Erste Bank und Sparkassen group, as well as through the retail branches of gold bullion wholesalers such as Schoeller Muenzhande, which is a fully owned subsidiary of the Austrian Mint. See BullionStar Gold University’s profile of the Austrian Gold Market for more details on the vast network of Austrian bank and wholesalers that sell physical gold coins and bars.

For further information on the sales patterns of the world’s largest precious metals mints, please see BullionStar blog “Bullion coin sales boost revenues of world’s largest Mints“.