Open letter to the CFTC

The Commodity Futures Trading Commission (CFTC) is holding an open hearing this Thursday, January 14 to deliberate and possibly vote on position limits for commodity futures markets, specifically the COMEX. Enforcing hard position limits prevents a few powerful entities from cornering the market on a commodity, and reduces the effectiveness of price suppression schemes. In other words, large commercial traders like bullion banks and hedge funds won't be able to rig markets, as the playing field is kept even. Rigged markets are destructive because market participants eventually exit and never return.

In an apt analogy, if investors in 401K savings accounts knew the mutual fund markets were rigged and investors were losing money due to surreptitious gaming by insiders, those retail investors would no longer invest their savings in said mutual funds. Likewise, Ponzi scheme fraudsters like Bernie Madoff discourage all investors due to lack of transparency and oversight by regulatory bodies like the Securities and Exchange Commission (SEC).

The CFTC has a similar role--only they monitor the futures and derivatives markets. It's time they stopped turning a blind eye to the price manipulation endemic in the precious metals and energy exchanges.

Dear Sirs,

It is outrageous that JPMorgan is allowed to be short 40% of the COMEX silver market and 30% of world production. There should be hard position limits in the precious metals markets, just like position limits should be enforced in other commodities, including the energy complex. This prevents price manipulation by a few concentrated positions, and sheds transparency in markets. Exemptions should be closely scrutinized, and naked shorting outlawed.

If we are to have free markets with true price discovery, we need to enforce position limits in all markets. Otherwise, the market is rigged to the benefit of a few, and destruction of the majority. In that scenario, eventually the market shrinks, as participants exit.

The current Administration gained office with a message of change and transparency...and the end of corruption and deceit. Please do your part in enforcing position limits in all commodity exchanges--including precious metals.

It is much better to choose to do the right thing, then to have it forced upon you. The price manipulation of certain commodities has temporary effect, but the true supply/demand dynamics of any commodity will eventually come to fruition. It will be by stampede if the market-rigging tactics are allowed to continue. Naked short sellers will be exposed when demand for physical delivery is unmet.

The ball is firmly in your court. Thank you.