The so-called spoofer is mainly a kind of false quotation in the stock or futures market trading process, and then quickly withdraw the order, which leads to investors misjudge the situation and order wrongly.
An investment bank person familiar with the case investigation process disclosed that the fraud behavior of JPMorgan traders mainly occurred in two trading links: first, before the announcement of gold and silver fixed price (benchmark price), false orders were placed and the market supply and demand relationship was artificially affected to make the fixed price conform to the wishes of these traders and ensure their gold and silver derivatives trading Second, a large number of false trading orders are automatically issued by high-frequency trading software during trading hours (placing orders first and then canceling them quickly), which causes many market participants to misjudge the situation and make wrong trading, so that they can make full use of the wrong pricing in the market to profit.
The first investigation failed
Reporters have learned from many sources that the CFTCs investigation into JPMorgans silver manipulation began in 2008. During the outbreak of the subprime mortgage crisis from March to October of that year, the price of silver futures dropped by more than 24% compared with that of gold futures, which aroused the concern of CFTC, and finally led to the investigation of suspected price manipulation in the silver futures market.
In November of that year, two silver futures traders, Brian Beatty and Peter Laskaris, filed a lawsuit in the federal court of Manhattan, accusing JPMorgan Chase and HSBC Holding of conspiring to suppress silver futures and snatch hundreds of millions of dollars of illegal income by issuing false trading orders.
According to the litigation information of the two traders, since March 2008, the two investment banks have manipulated the silver futures market price by notifying each other of large-scale transactions, and issued fraudulent spooftrading orders to lower the price of silver futures. However, due to lack of evidence, the investigation ended.
Zhou Qiang (not his real name), a Wall Street hedge fund manager who has invested in precious metal futures for a long time, recalled to reporters that at that time, many hedge funds thought that the lawsuit would win a lot, although they found that in August 2008, JPMorgan Chase and HSBC Holdings held a total of 85% short selling contracts of silver futures, suspected of market monopoly. Among them, from 2008 to 2009, JP Morgan has been holding more than 40% of the short positions of silver futures on the New York metal exchange.
However, the CFTCs four-year investigation has failed to find more convincing evidence. He told reporters. CFTC has retrieved more than 100000 documents and transaction details (including a large number of trading records of JPMorgan Chase and HSBC Holdings traders), but still failed to find any clues that they are suspected of manipulating the price of silver futures. Although the CFTC acknowledged that there were some abnormal phenomena in silver futures trading on many trading days.
The above-mentioned investment bank personage who is familiar with the investigation process of the case disclosed that behind this, JPMorgan Chase has effectively covered up the behavior of fraud. For example, they classified most of the false trading orders into high-frequency trading model and placed orders automatically, which was not human-made operation. The reason why these trading orders were withdrawn quickly was that the high-frequency trading model found that the price fluctuation caused these trading orders to exist In the case of loss risk or no transaction, according to the risk aversion rules originally set by the automatic program model, only cancellation can be carried out.
In addition, JP Morgan has been arguing that the huge short positions in silver futures are risk hedging based on swap and derivatives transactions.
A lot of investors and academic research institutions are reluctant to let it go. The investment banker said. For example, Andrew Caminschi, a researcher at the University of Western Australia, studied and analyzed the trading data of silver market from 2000 to 2014, and found that the fixed price of silver on that day was 10-12 basis points lower than the average price of that day, which means that investment banks such as JP Morgan are likely to make profits by artificially depressing the fixed price of silver.
Zhou Qiang disclosed to reporters that although JP Morgan escaped CFTC investigation for a time, some financial data released by JPMorgan made the market suspicious. For example, in the first quarter of 2012, JP Morgan made 64 positive returns in 65 trading days, and only one trading day suffered losses.
How can the investment bank maintain such a high trading chance in the rapidly changing financial markets if there is no artificial manipulation of the benchmark price of certain financial transactions? He pointed out.
he path winds along mountain ridges
The reporter has learned from many sources that the key evidence that JPMorgan is suspected of manipulating the prices of precious metals and treasury bonds and futures is the fuse that many former JP Morgan traders actively plead guilty in recent years.
In August last year, Christiaan trunz, a former precious metals trader at JPMorgan, admitted at a hearing in federal court in Brooklyn, New York, that he had manipulated and profited from precious metals prices by deception while working at Bear Stearns and JPMorgan from 2007 to 2016.
In November 2018, John Edmonds, another former precious metal Trader at J.P. Morgan, admitted that he had conspired with other traders to carry out commodity price manipulation and fraud transactions, such as issuing false and misleading false trading orders in commodity futures markets such as gold, silver, platinum and palladium, so as to profit from the unfair market he created.
It is worth noting that the price manipulation of precious metals admitted by these traders is almost the same as the improper trading behavior recognized by JPMorgan Chase. Specifically, these traders issue false orders and inject a large amount of false trading orders and misleading trading information into the precious metal futures market to deceive other investors, so as to make the price of precious metal futures fluctuate towards the price that the manipulators hope to see, thus making them obtain huge profits, while the uninformed investors suffer a lot of losses.
In addition, the judicial department of the United States also described in detail a detailed process of price manipulation that took place on October 12, 2012. On that day, Edmonds issued trading orders to the Chicago Mercantile Exchange to sell 402 silver futures contracts, which made the market mistakenly believe that the silver price was going down and followed up the sale. However, these trading orders were cancelled before implementation, and as a result, he bought at a price lower than the market price When the silver price returned to normal, he successfully collected the spread income.
In addition, many Wall Street investment institutions also found that during 2008-2012, the price trend of silver before and after the announcement of daily silver price was quite strange - before the announcement of fixed price, someone always seemed to deliberately lower the price; after the announcement of the fixed price, the silver price quickly returned to normal valuation, among which some institutions were artificially lowering the fixed price to make profits. After all, hundreds of billions of dollars of silver derivatives trading are based on fixed price as the reference benchmark. The biggest advantage of artificially lowering the fixed price is that it greatly increases the probability of profit of the silver derivatives trading position in the hands of the manipulator. Even if the price is misjudged to rise or fall, it can also avoid huge losses by manipulating the fixed price.
According to Bart melek, head of commodity strategy at TD securities, it was the confession of these former JPMorgan traders that gradually surfaced the evidence chain of JPMorgans silver price manipulation.
In September 2019, the relevant U.S. Departments filed a second indictment, claiming that eight unnamed accomplices of J.P. Morgan in New York, London and Singapore participated in improper investment transactions for many years, thus manipulating precious metal prices and cheating customers.
The defendants include Michael Nowak, former managing director and head of global precious metals division of JP Morgan, Gregg Smith and Christopher Jordan, former executive director and head of precious metals division of JP Morgan; they are accused of conspiracy to participate in racketeer infilled and corrupt organization act (RICO), and suspected manipulation of precious metal futures market Market price.
According to the investment bank personage familiar with the investigation process of the case, the relevant departments found that the traders of J.P. Morgan were concocting in the gold, treasury bond futures and other markets, and artificially manipulated the price fluctuation of gold futures and treasury bond futures by using false orders and fraud. This forced J.P. Morgan to quickly agree to pay a fine of $920 million to settle the lawsuit. Otherwise, the continued in-depth investigation of relevant departments may dig out a larger price manipulation insider and evidence chain, which will cause more severe negative impact on JPMorgans reputation.
Forced transfer of the right to speak for silver price fixing
Before the great changes were made in the pricing mechanism of gold and silver in 2014, the benchmark prices of silver and gold in London were determined by the five gold market makers through comparison of trading orders. The price affects the profits and losses of trillions of dollars in gold and silver derivatives trading. It is worth noting that the operation mode of fixing the price of silver and gold by investment banks lasted 117 years and 95 years respectively.
Source: responsible editor of 21st century economic report: Guo Chenqi_ NBJ9931