Dear GATA:
I read Ronan Manly's July 18 report asserting that the New York Commodity Exchange's gold futures market is structured to facilitate price manipulation:
http://www.gata.org/node/17521
The U.S. Commodity Futures Trading Commission likely won't ever do anything about that. But I wonder if anyone has looked into whether the Comex and its operator, CME Group, might be held liable for knowingly facilitating or aiding and abetting illegal activity?
Perhaps a civil lawsuit seeking damages or an injunction might prompt changes in the monetary metals futures exchange to prevent manipulation. Your thoughts?
-- C.W., New York
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Dear C.W.:
Thanks for your note. While these days you can be sued for wearing socks that don't match, it seems unlikely that any litigation against the Comex could succeed, especially if, as GATA suspects, most of the manipulative trading is done at the behest of the U.S. government and other governments.
For the Gold Reserve Act of 1934, as amended in the 1970s, establishes the U.S. Treasury Department's Exchange Stabilization Fund and authorizes it to trade secretly in all markets:
https://www.treasury.gov/resource-center/inte...ages/esf-ind...
The U.S. Federal Reserve is authorized to trade secretly as well.
Further, governments and central banks receive volume discounts for secretly trading futures contracts for every financial instrument and commodity on the major U.S. exchanges, and this is known to U.S. market regulators:
http://www.gata.org/node/14385
http://www.gata.org/node/14411
So obviously the U.S. government believes that this secret trading is legal, and surely the U.S. government understands that it is almost impossible to trade against entities that are empowered to create infinite money.
That governments would rig futures markets to support their currencies and bonds was perhaps first asserted by the British economist Peter Warburton in 2001:
http://www.gata.org/node/8303
Maybe a clever law firm could devise some rationale for separating the Comex and CME Group from defenses of being an innocent bystander or sharing the sovereign immunity of government-instigated trading. But such litigation would cost millions of dollars, and that money won't be coming from the monetary metals mining industry, since on the whole the industry lacks any courage for defending itself against its governments and bankers.
So as a practical matter we probably can do no more than keep trying to expose the market rigging so that investors and others avoid the futures markets and the rigging loses its effectiveness. Knowing that market rigging ordinarily would be illegal, governments have given themselves cover in the law against complaints of fraud.
