Oct. 27, 2010, 7:56 p.m. EDT
J.P. Morgan, HSBC
sued for silver manipulation
By David Benoit
NEW YORK (MarketWatch) -- Two separate lawsuits filed in federal court in Manhattan Wednesday allege that banks J.P. Morgan Chase & Co. (JPM 37.63, +0.12, +0.32%) and HSBC Holdings Inc. (HBC 52.11, -0.31, -0.59%) manipulate the price of silver futures by "amassing enormous short positions."
The suits allege that by managing giant positions in silver futures and options, the banks have influenced the prices of silver on the New York Stock Exchanges' Comex Exchange since early 2008.
The Commodity Futures Trading Commission has been in the midst of a high-profile, two-year-old investigation of the silver market.
J.P. Morgan declined to comment on the lawsuits. HSBC wasn't immediately available to comment.
A suit filed by Peter Laskaris, who traded COMEX silver futures and options contracts, says the banks colluded on the silver market and informed each other of large trades. It says the banks used their large positions to effect the market by "flooding" it with a disproportionate number of orders.
The suit says J.P. Morgan and HSBC in August 2008 together held 85% of the net short position in silver and by the first quarter 2009 held $7.9 billion in precious metal derivatives.
J.P. Morgan and HSBC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, The Wall Street Journal reported, citing silver traders and a person close to the investigation.
In recent months, however, the banks with large futures positions have sharply reduced the size of their holdings.
The lawsuits request the banks' "unjust" enrichments from the collusion and manipulation.
(Updates with more information from suits, HSBC declines to comment, comments from a strategist.)
NEW YORK (MarketWatch) -- Two separate lawsuits filed in federal court in Manhattan Wednesday allege that banks J.P. Morgan Chase & Co. JPM and HSBC Holdings Inc. HBC manipulate the price of silver futures by "amassing enormous short positions."
The suits allege that by managing giant positions in silver futures and options, the banks have unfairly influenced the prices of silver on the New York Stock Exchanges' Comex Exchange since early 2008.