First Majestic Silver CEO Dings CFTC On Silver Market ManipulationBy Kitco News
Thursday June 04, 2015 08:22
(Kitco News) - Senior silver producer First Majestic Silver Corp.’s (TSX:FR)(NYSE:AG) Keith Neumeyer, president and chief executive officer, openly questioned the U.S. futures and options watchdog regarding silver market manipulation earlier this week.
In a letter to the Commodity Futures Trading Commission’s (CFTC) chairman Timothy Massad, Monday, Neumeyer raised his concerns with the regulator’s Commitment of Traders Report (COT), dated May 19, 2015.
He noted “a record position change of more than 28,200 net contracts of COMEX silver futures being purchased by traders in the managed money category, the equivalent of 141 million ounces of silver and 61 days of world mine production.
“The COT report also indicates nearly 24,400 net contracts were sold by traders classified as commercials and the equivalent of 122 million ounces and 53 days of world mine production,” he said. “In addition, the report indicated that 8 traders in COMEX silver futures held a net short position of 376 million equivalent ounces of silver, by far the most of any commodity in terms of world production (163 days).”
Neumeyer said in the letter that he’s confused why a concentrated short position would be so large.
He added that the murkiness of who’s trading the contracts and what they are labeled as further muddies the process.
“Since the Commission classifies traders in the managed money category as speculators (as opposed to hedgers) and because there is little evidence from public financial reports that silver producers are represented in the commercial category, it appears the big changes in positions on the COMEX are by speculators and commercials acting as speculators and not by those engaged in bona fide hedging.”
Neumeyer went on to conclude that the CFTC was not working within the confines of commodity law and said that there is an issue with the discovery price process as “real producers and consumers of silver don’t appear to be represented.”
He ended the letter stating that based on what he outlined, silver market manipulation by the CFTC is apparent.
“As one of the largest primary silver producers in the world, we feel that an effective and fair pricing mechanism is critical for the healthiness of our industry and for the millions of people impacted by what appears from the outside, to be manipulative practices by a concentration of players.”