In Ted Butler's Archive

The Cop On The Beat – Part II

Here is the response I received from my letter to CFTC Commissioner Bart Chilton, followed by my reply to him;


November 19, 2007

Thank you for your email regarding the silver markets.  I appreciate hearing from you. As an independent regulator, I take all communications concerning the markets overseen by the CFTC seriously.  I know that these issues are important to you, as they are to me, and I want you to know that I have heard you.

Upon receiving your, and other, emails, I requested a briefing from the Commission surveillance staff regarding the questions and issues referred to in your email.  I have received a very detailed and thorough analysis to the questions raised by Mr. Butler in his November 13, 2007 email to me.

As you know, Mr. Butler’s questions imply that the silver market is being manipulated.  A review of market participants and their positions and an analysis by the professional staff at the Commission has assured me that, at this point in time, there is no such manipulation.  That does not mean that there will not be attempts in the future to do so, and the Agency will remain vigilant in searching for any fraud, abuse or manipulation in the silver, or other, markets.

It may interest you to read the May 14, 2004 letter related to this issue, which goes into great detail addressing many of the same allegations and concerns raised by Mr. Butler recently.  Much of the analysis in that letter remains applicable today; be assured, however, that although more than three years have passed since that review, the Commission has continued to monitor these markets in a consistent and comprehensive manner to ensure that they remain free from fraud and manipulation.  The web link is listed below for your further information.

Furthermore, I am hopeful that additional information relating to these matters will be available on the Commission website ( in the not-too-distant future.

Again, I value your input and I thank you for taking the time to share your opinion with me.  Please feel free to do so in the future.


Bart Chilton

Web link:



Bart Chilton, CommissionerCommodity Futures Trading Commission

Three Lafayette Centre 1155 21st Street, NW

Washington, DC  20581

Telephone: (202) 418-5060

Fax: (202) 418-5620


November 20, 2007

Dear Commissioner Chilton;

Thank you for your prompt response. It is apparent from your letter that you grasp the significance of this issue and I fully expect your service as Commissioner to be to the benefit of our markets and all legitimate participants.

Unfortunately, the Commission’s surveillance staff has been non-responsive to my five (5) specific questions about the short-side concentration and to my more recent concerns about uneconomic spreading in COMEX gold and silver futures, designed to mask that concentration. As you know, these questions were asked three months ago. In addition, it’s frustrating that the CFTC has not required the front-line self-regulator, the NYMEX, to respond, especially since they are now a public company.

The issue of concentration and manipulation is straightforward. Manipulation is the number one responsibility of the Commission. Concentration is required for there to be a manipulation. That’s why the Commission closely monitors and publishes concentration data in all the markets it regulates. On this, I am sure you would agree.

The only question is at what point does a position become so concentrated as to be considered manipulative? The most current data from the Commission indicates that in COMEX silver futures, the 4 or less largest traders hold a net short position greater than 50% of the total open interest (net of reported non-commercial spreads and likely commercial spreads which are not reported). In COMEX gold futures, the 4 or less largest traders are net short over 40% of the total open interest, employing the same calculation. In addition, the concentrated net short position in silver, in terms of days’ world mine production, towers over any other commodity

If a concentrated net position of more than 50% of the total market, held by a few traders, is not manipulative, then what percentage would be considered manipulative? Contentions that these few large traders may be hedging does not excuse manipulation.

Commissioner Chilton, this is a crime in progress. If a cop on the beat came across armed thugs terrorizing innocent victims and called headquarters for back up assistance, we would not expect headquarters to say call back 3 months later. This seems to be the standard procedure for the Commission staff in this matter.

In a rational world, one would think credible allegations of manipulation would result in CFTC staff actively investigating every angle of those allegations, including questioning the person making those allegations, me, in great detail. Yet, in this matter, it always evolves into Commission staff circling the wagons to come up with the best-sounding excuse as to why there is no manipulation. It always becomes some sort of sick game in which the Commission tries to defend its past denials of manipulation, no matter what new evidence is presented. It is a game that works against the public interest.

I wrote to you because your public speeches indicated you were serious about the role the Commission should play in regard to fraud, abuse and manipulation in our markets. If you would like more information on this matter, please let me know.


Theodore Butler

Start typing and press Enter to search