CFTC Closes Investigation Concerning the Silver Markets

The CFTC Division of Enforcement announced that it was closing an investigation into the silver markets that had been publicly announced in September 2008. The Division of Enforcement did not recommend charges to the Commission from the investigation. Based upon law and evidence, the CFTC said it that does not believe there is a viable basis to bring an enforcement action with respect to any firm or its employees. The CFTC said that it was also taking the unusual step of announcing the closing of the investigation since the launch of the investigation had received so much attention.

The investigation stems from September 2008, when the CFTC confirmed it was investigating complaints of misconduct in the silver market. The CFTC launched an investigation after receiving numerous complaints regarding the manipulation of silver prices from silver futures contracts that were traded on the Commodity Exchange, Inc. (“COMEX”). According to the CFTC, the Division of Enforcement utilized more than seven thousand enforcement staff hours reviewing and analyzing position and transaction data, including physical, swaps and futures trading data, and interviewing witnesses. The investigation also included an evaluation of silver market fundamentals and trading within and between cash, futures, and over the counter markets.

The CFTC noted that it takes these complaints seriously and it does not hesitate to use its authority, including the new manipulation authority in the Dodd-Frank Act, to bring market manipulation charges that are supported by evidence.

Lofchie Comment:  Given the amount of effort that was put into the investigation, it would be a good thing if the CFTC could issue some public report of the analysis.  The release of a report which shows that markets do strange and unexpected things, even in the absence of human misconduct, would serve the public interest.  As things stand now, it sometimes seems that every unfavorable or unexpected turn in prices can serve as the basis for criticism of the conduct of financial market participants, and sometimes as justification for regulations that may end up impeding rather than aiding the efficient workings of the market.

See: CFTC Press Release.