In the world of precious metals futures, hedgers are the 800 pound gorilla in the room. Hedgers are the ones who are most likely to have applied for and received an exception on the futures market to trade in excess of the limits that everyone else has to abide by. For Comex 5000 ounce Silver futures, we have known for some time now that two US banks hold an outsized short position that amounts to a third of the entire Commercial Short position. (Same two banks hold such an insignificant long position that it doesn’t even amount to a tenth of a percent)
But the identities of these two hedging US Banks is considered privileged information, not to be divulged to the public at large because it could cause catastrophic problems, at least according to the good folks at COMEX. Still, information is information and it has been apparent for some time that one of the hedgers with an exemption was JP Morgan. The identity of the second US bank was thought to possibly be Goldman Sachs, but based on information from COMEX, that does not appear to be the case.
Based on the CME Group delivery notices, There are a total of four entities listed as being Hedgers in the Commercial Category. In total, there appear to be 21 Commercial Firms listed as operating in Silver Futures. Of the four Hedgers, who are likely to have the exemptions to the 6000 contract limit, the name of JP Morgan Futures appears not once, but twice. The other listed hedgers are Penson GHCO and Bank of Nova Scotia. Of the two, I would favor the Bank of Nova Scotia as the likely second US bank considering this Canadian-based bank does have branches throughout the US and would possibly be registered as a US Banking Corporation for the US operations. However the double listing of JP Morgan Futures is puzzling.
Number 1, why would JP Morgan Futures Inc. need two separate listings as a hedger? The only reason that I can come up with is to have two separate exemptions to the 6000 limit. Point in fact, JP Morgan Futures Inc. is not only listed twice as a hedger, but also has a listing as a Commercial Trader. Does JP Morgan Futures Inc. have three separate accounts, two of which are exempt from the 6000 limit? If so, then JP Morgan has the capacity for at least 18,000 contracts and possibly as many as they want through their two hedging listings. No other Commercial trader has 3 listings, although six of the listings have two listings (RJ O’Brien & Associates, RJ Obrien; Fortis, Fortis Clearing Americas; UBS Securities, LLC (x2); RCG, Rosenthal Collins Group; Citigroup, Citigroup Global Markets; Penson GHCO (x2)) It is only Penson GHCO that has one listing as Commercial and one as Hedger.
Could the two US banks in actuality be a single bank with two different hedging accounts? Or is Citigroup carrying only a maximum of 6,000 shorts and letting JP Morgan Futures Inc. cover the other 23,000 short contracts? Inquiring minds would like to know.
Disclosures: Long GLD, SLV, Physical Metals, retirement accounts