May 28, 2022

How the COMEX Crashed the Silver Market

By the close of trading on Wednesday, May 4th, the silver market had experienced significant selling pressure that drove prices down by 17.3% from Thursday, April 28th.  This sell off corresponded exactly to a series of increased margin requirements by the COMEX  for trading silver futures contracts.

Silver traders who may have been apprehensive about additional margin increases did not have long to wait.  After the close on Wednesday, May 4th, the COMEX announced two huge additional hikes in silver margin, effective at the close of business on Thursday and another hike effective at the close of trading on Monday, May 9th. As of Monday, initial contract margin requirements would be increased to $21,600 and to $16,000 for hedgers.  A year ago, when silver was trading in the $18 range, the margin requirement for a speculative contract was only $4,250.

The rapid series of five margin increases by the COMEX resulted in raising initial margin requirements for speculators from $11,745 to $21,600 – an increase of 84%.    The margin requirements for hedgers also increased by 84% from $8,700 to $16,000.   Silver futures traders would now be forced to come up with huge amounts of additional cash or liquidate holdings on price weakness.   The collapse in silver prices on Thursday May 5th, triggered by the COMEX margin increases, indicates that many players were forced to liquidate positions.

The actions taken by the COMEX constitute a perfect text book example on how to crash a market. The non stop increases in margin requirements resulted in a dramatic reduction of liquidity in the silver market by forcing out small speculators who were not prepared to commit additional cash for margin maintenance.  As prices fell in response to the COMEX margin increases, bigger players in the silver market were forced to liquidate positions to avoid margin calls and large losses on leveraged positions.

The last two margin increases by the COMEX, after silver had already declined by over 17%, created the perfect crash scenario.   Silver traders liquidating positions to meet new margin requirements caused a further cascade of forced selling and the silver crash became inevitable. The elimination of liquidity from any market will result in falling prices and the COMEX knew this.

If someone wanted to crash the silver market, the moves taken by the COMEX were perfectly designed to accomplish this by reducing liquidity at a time during which the markets were already stressed from previous margin increases. The result was a collapse in silver prices from $48.70 to the $34 range.

In response to the outrage over the devastating series of margin requirement increases, Kim Taylor, President of CME Clearing, which owns the COMEX, issued a statement explaining CME’s actions. According to Ms. Taylor, margin increases are related to risk management and done to prevent default by clearing member firms.  Margins are adjusted based on market volatility and are not designed to move a market or discourage investor participation.  Among the factors considered in setting margins is a CME calculation of a worst case scenario for possible portfolio losses.

Specifically regarding the margin increases on silver futures, Taylor stated that “we have made several changes in recent weeks to adjust to volatility in the marketplace…Our interest is in providing security for the entire market – no matter which way it moves”.

CME’s statement seems disingenuous at best.  The protection they speak of is not for the benefit of investors, but rather for the benefit of CME and clearing house members.  The actions of the COMEX in implementing a rapid series of margin increases, even after silver had already steeply sold off, resulted in large profits to short sellers and reduced risk for CME at the expense of huge losses for silver investors both large and small.

A slower series of margin increases would have seemed more appropriate to address price volatility.  The CME knew or should have known that its actions would severely limit liquidity in the silver market.   The decrease in liquidity caused further market volatility, requiring more margin increases, which in turn crashed the price of silver. Anyone looking into the great silver crash of 2011, can start by looking at the COMEX.

Comments

  1. Indentured_Servant says

    “Specifically regarding the margin increases on silver futures, Taylor stated that “we have made several changes in recent weeks to adjust to volatility in the marketplace…Our interest is in providing security for the entire market – no matter which way it moves”.”

    Uhhh………How does crashing the market help the market adjust to volatility? They create the volatility by first selling something they do not actually own, then they manipulate the market thru various means such as increasing margin requirements. I think the latter minimizes the effects of the former which only “provides security” to them since they control who knows about it and when it will happen!

  2. end the fed says

    “I think the latter minimizes the effects of the former which only “provides security” to them since they control who knows about it and when it will happen!”

    This scenerio should be illegal and someone should do jail time, but that will never happen! This was done deliberately and purposely. Keep buying silver for delivery only.

  3. I am an attorney that is looking into the possibility of a class action lawsuit against CME for these shenanigans. Anyone interested can go to my website and send an inquiry through the website explaining what losses you incurred due to the CME’s margin increases in recent weeks.

  4. The US Bankers hold huge short positions in Gold and Silver Futures.Fractional Reserve Banking will come in handy for them as opposed to the ordinary investors,ALWAYS.Recall the value of money in the hands of a Banker is about 10 times more,”VALUABLE” than THE SAME AMOUNT in the hands of “others”.Talk of DISCRIMINATION and FAIR PLAY!Because of this Bankers should NEVER be allowed to play the Stock,Currency and Commodities markets,in the first place.

  5. Kyle Bates says

    So, basically, the CME h-in-charge has scared off thousands of small investors, and benefitted the large banks short on silver contracts they cannot fulfill (like Rothschild’s JPmorgan), so they can now eat up the market and make it into charade, same as with anything else they “touch”.

  6. William M says

    “Specifically regarding the margin increases on silver futures, Taylor stated that “we have made several changes in recent weeks to adjust to volatility in the marketplace…Our interest is in providing security for the entire market – no matter which way it moves”.”

    Oh yeah? Tell me then why you raised margin requirements for the longs but not the shorts? Thats the smoking gun of malicious protective intent.

  7. Thank you CME ! Will be buying more silver at firesale prices.

  8. Criminal action by criminals. the only way to bust these crooks is to buy physical or demand physical silver ( or Gold)on contract date. Buy physical , go long and stay long. There is more evidence that the physical market is detaching from the crooked paper market- time is on our side if we hold physical.

  9. harley hooch says

    Lets keep buying silver until we put these criminals out of business.I am a disabled vet but i put every extra cent into silver.Bought 24 more coins today. Enough is enough ladies and gentlemen. Lets put the banksters out of business and into jail. HiYo Silver. lets go get em.

  10. tortuga bob says

    Anyone holding physical silver hasn’t lost one cent. Anyone trying to buy physical silver now has the opportunity to get into the market (if physical silver can be found). These margin increases are only hurting those investors trying to make a quick buck in the paper “silver” market. Realize what is going on here people. The margin increases are the desperate acts of the banksters holding huge naked short positions in the silver futures market. They are very close to panicking. Be patient. Keep buying physical silver. The more silver we take out of the market, the less they have to cover their naked short positions. In the end, the holders of physical silver will prevail.

  11. One other factor has to be brought into the clearly sneak attack on Silver, that factor is a very large sell order at the close on Friday. The Asian and European markets were closed for May day over the weekend. The sell order was so massive as to set the market into a crash. Clearly the COMEX is very flawed to even allow one order to set off such bad things. The reason I feel they are morally bankrupt as an organization is the fact that they saw the market disaster that sell order had and they continued with the first margin increase. The two major events created the disaster which I believe they did with a wink and nod of the Federal Reserve. During the last two weeks the EURO has gone from 150 to 141 which is a huge drop. Nothing in the United States fiscal situation would make the dollar stronger.

    Is it any wonder why people believe the stock market and all fiscal markets are rigged by the government and market organizations which run them. I know I will never want to have anything to do with COMEX. years ago I gave up on the New York stock market after reading about Dick Grasso and his rule as chairman of the exchange.

    I suspect the USA is facing a major melt down because of the fact that it has allowed market makers to become the
    controllers of the market. We no longer have a free market system. We cannot purchase silver at the market price because the powers to be have decided it was to high. We are the new communist. We plan our economy and I am sure we will fail like the soviet union.

  12. Now is the time to bust the Banksters! Buy up PHYSICAL Gold and Silver NOW with both fists! Buy from local coin shops all the way up to reputable Bullion dealers on the national level. Get out of all your paper stocks and ETF’s and convert to real Gold and Silver in the form of bars, coins etc… The system can be imploded in a matter of weeks/months if everyone goes to the physical metals. Remember, Gold and Silver are the only real money! Some of the uninformed talking heads say you can’t eat Gold and Silver! Have you ever tried eating paper (fiat) money? Let me know how it works for you. Try cashing in Fiat currency when we hit hyperinflation and/or the Dollar loses the world’s reserve status, which could happen in a matter of month’s? You will be much better off with the metals!

  13. Turborewind says

    My stack still looks the same.

  14. Yes I can understand but price is increasing day by day every-time I think I am going to buy some jewelry next week I found the next week price is much higher than previous I don’t know what to do can anyone provide me details about how can I get some details about when a silver price will be down a little so I can book some. Thanks

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