Just in and it is a bombshell beauty from the CFTC….

Inquiry regarding Bank Participation Report

Dear Messrs. Organ and Murphy,

Commissioner Chilton asked that I look into your issue regarding the CFTC Bank Participation Report (the "BPR"). Specifically, you noticed that beginning with the December 2009 BPR, the CFTC has not included a breakdown of the participating banks in the silver futures, although the breakdown is provided for gold. You had inquired as to why the information has changed.

Beginning with the December 2009 BPR, the CFTC began suppressing the trader count in some markets. The change became effective with the Dec 2009 BPR because it was the next available report to be published following the Commission’s November 2009 decision to implement the change. The decision to suppress the trader counts was made as part of an ongoing review of the methodology of the BPR. As part of that review, the Commission determined that where the number of banks in each reporting category is particularly small, fewer than four banks, there exists the potential to extrapolate both the identity of individual banks and the bank’s positions. Under section 8(a) of the Commodity Exchange Act, the Commission, among other things, is generally prohibited from publishing data and information that would separately disclose the business transactions or market positions of any person/entity. Accordingly, in order to protect the confidentiality of market participants’ positions, the Commission determined to suppress the individual category breakdown when that number is less than four. An explanation of this determination appears in the Explanatory Notes section of the BPR as it appears on the CFTC website, www.cftc.gov. I have cut and pasted the language below for your convenience. The Explanatory notes appear at: http://www.cftc.gov/marketreports/bankpa
rticipation/bankparticipation_about.html. Notably, these Explanatory Notes were posted on November 30, 2009, prior to the release of the amended BPR.

Bank Participation Report

Explanatory NotesSince the 1980s, the CFTC has provided, on a monthly basis, the U.S. banking authorities and the Bank for International Settlements (BIS, located in Basel, Switzerland) aggregate large-trader positions of banks participating in various financial and non-financial commodity futures. Since the BIS used some of this aggregate data in its own publications, beginning in the late ‘90s the CFTC has posted the "Bank Participation Report" (BPR) for public access on its website (cftc.gov).

Separate reports are generated for futures and for gross options (not delta adjusted). The as-of date of the monthly BPR is typically the first Tuesday of each month, and publication on the Commission’s website occurs on the following Thursday or Friday. The BPR includes data for every market where five or more banks hold reportable positions. The BPR breaks the banks’ positions into two categories—U.S. Banks and Non-U.S. Banks—and shows for each type their aggregate gross long and short market positions. For purposes of protecting the confidentiality of participants’ market positions (as required under §8(a) of the Commodity Exchange Act), when the number of banks in either category (U.S. Banks or Non-U.S. Banks) is less than four, the number of banks in each of the two categories is omitted and only the total number of banks is shown for that market. The BPR is based on the same large-trader reporting system database that CFTC economists use to monitor large-trader activity in the regulated futures and options markets, and which also is used to generate the weekly Commitment of Traders (COT) report. The BPR’s "U.S. Bank" and "Non-U.S. Bank" trader classifications are based on the self-description of a trading entity on its CFTC Form 40. Each trader files that Form upon first becoming reportable and every two years the trader remains reportable, or more frequently upon CFTC request.

If any reportable trader is "commercially engaged in business activities hedged by use of the futures or option markets," it enumerates its business activities on Schedule 1 of the Form 40. If on that Schedule the reportable trader describes itself as a U.S. Commercial Bank or as a Non-U.S. Commercial Bank in any one commodity, that designation is applied to its positions in all commodities published in the BPR. A given business enterprise may have one or more trading entity among which are a U.S Commercial Bank or a Non-U.S. Commercial Bank, or a non-bank. Each trading entity could be a separate reportable trader, which would file a separate Form 40. Only traders that are classified as either a U.S. Commercial Bank or a Non-U.S. Commercial Bank are reported in the BPR.

The CFTC does not maintain a history of BPR data except for the rolling most recent 25 months posted on the Commission’s website.

-END-

GATA's Adrian Douglas responds...

Bill,
Game, set and match!

Yesterday I sent an email to you that explained that HSBC and JPM are NAMED in the Treasury Department OCC Report on the holdings of derivatives by American banks. These reports show that these two banks hold more than 95% of the derivatives in precious metals but that these holdings dwarf the entire open interest notional value of gold and silver on the COMEX. I noted that as ONLY two banks hold a massive short position on the COMEX, it a very logical inference that these two banks are necessarily the same. That is to say that HSBC and JPM ARE the massive short sellers on the COMEX. Voila, just 24 hours later the CFTC confirms it for us because they say that it would be possible to extrapolate who the banks are that hold the positions. How could it be extrapolated? It would have to be from some other positional data that is made public. The only data of that nature that I know of is the OCC derivatives data.

Note the word used by the CFTC “suppress”. Yes, that is the word GATA uses in talking about the gold market. It is suppressed and the CFTC is now complicit is suppressing the identity of the banks who are suppressing the price. Why are entities that have a manipulative, one-sided position (the banks hold almost no long position) be entitled to anonymity?

This is worse than the ex-Soviet Union. How can a Bank Participation Report SUPRESS the participation of banks???? Does nobody at the CFTC realize how comical that is?

I now expect that someone will contact the Treasury and get the names of the largest derivative holders to be “suppressed” in the OCC US Bank Derivatives report.
Cheers
Adrian

I took a look at the January 2010 BPR, and noted that the change has affected the reporting on several commodities including soybeans, wheat, corn, heating oil, natural gas, etc., such that silver has not been treated in a manner inconsistent with the report structure.

I hope this explanation is helpful. Please do not hesitate to contact me if you have any further questions.

Regards,
Laura Gardy
Legal Assistant to Commissioner Bart Chilton
202-418-5354