Tag: JP Morgan
Ex-JPMorgan Gold Trader Faces 30 Years in Prison for Spoofing
December 9, 2022 / FrankNez
Market News: Ex-JPMorgan Gold Trader faces time in prison after spoofing the market.
An Ex-JPMorgan Gold trader was found guilty of fraud in the commodities market.
Christopher Jordan was convicted of wire fraud affecting a financial institution by a federal judge in Chicago, the latest win for U.S prosecutors in their crackdown of on illegal "spoofing" trades and market manipulation.
Jodan was found guilty Friday after a four-day trial in the same courthouse where two of his most senior colleagues on the JPMorgan precious metals desk were convicted in August of spoofing related charges for deceptive buy and sell orders.
Jordan worked at JPMorgan from 2006 to late 2009.
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Department of Justice Comments on JPMorgan Trader
DOJ report on Ex-JPMorgan Trader spoofing the gold market.
Between 2008 and 2010, Jordan placed thousands of spoof orders, i.e., orders that he intended to cancel before execution, to drive prices in a direction more favorable to orders he intended to execute on the opposite side of the market.
Jordan engaged in this deceptive spoofing strategy while trading gold and silver futures contracts on the Commodity Exchange (COMEX), which is a commodities exchange operated by the CME Group.
These deceptive orders were intended to inject false and misleading information about the genuine supply and demand for gold and silver futures contracts into the markets.
He is scheduled to be sentenced at a later date and faces a maximum penalty of 30 years in prison.
Four other former JPMorgan precious metals traders were previously convicted in related cases.
In August 2022, Gregg Smith and Michael Nowak were convicted after trial in the Northern District of Illinois of wire fraud affecting a financial institution, commodities fraud, attempted price manipulation, and spoofing.
In September 2020, JPMorgan admitted to committing wire fraud in connection with (1) unlawful trading in the markets for precious metals futures contracts and (2) unlawful trading in the markets for U.S. Treasury futures contracts and in the secondary (cash) market for U.S. Treasury notes and bonds.
JPMorgan entered into a three-year deferred prosecution agreement pursuant to which it paid more than $920 million in criminal monetary penalties, criminal disgorgement, and victim compensation, with parallel resolutions by the Commodity Futures Trading Commission and the Securities Exchange Commission announced on the same day.
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Source(s): Bloomberg, Justice.Gov.
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Phase 6 Margin Call Requirements on The Way
August 1, 2022 / FrankNez
Market News: Phase 6 Margin Call Requirements on the way | ISDA
Market News: Phase 6 margin call requirements are on the way.
Institutions under UMR who had not previously been affected by these specific margin requirements will be as of September 1st, 2022.
Uncleared Margin Rules (or UMR) were created to address the OTC derivatives market–and its participants– in the wake of the global financial crisis (GFC) of 2008-2009.
It implemented new margin requirements for non-centrally cleared derivatives to avoid further systemic risk.
For this reason, they were 'phased in', or broken down by phases.
Institutions affected by phase 6 margin call requirements could find themselves in a sticky situation and I'm going to discuss why down below.
Preparing for margin calls
The requirement to exchange initial margin for over-the-counter (OTC) derivatives is one of the last remaining pillars of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that remains to be fully implemented.
The five-year implementation period began in 2016.
UMR Phases – Phase 6 margin requirements
The chart above depicts the number of counterparties affected throughout each phase.
Phase 5 occurred in September of 2021 where 319 counterparties were affected.
We will be entering Phase 6 in September of 2022, where 775/990 counterparties with more than the $8 billion scope detailed on the graph, or gross amount across all uncleared OTC trades, will be affected.
Phase 5 of UMR touched a mix of sellside and buyside firms, especially medium-sized banks and larger buyside firms.
However, Phase 6 is almost exclusively buyside-focused meaning we could potentially see a massive market rebound, per Bloomberg.
Institutions affected by Phase 6 margin call requirements may include asset managers, banks, hedge funds, and private family offices.
The entire process is extremely challenging according to Bloomberg.
But while it may seem complex in nature, it's the results that truly matter.
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How long will it take for margin calls to happen?
Although Phase 6 margin call requirements are going into effect on September 1st, 2022, it's important to note that this is going to take some time.
The derivatives market is massive, now boasting approximately 1 quadrillion derivatives as of May 2022, per Investopedia.
The Senior Principal at BNY Mellon has said in the past that even after Phase 6 there will be margin calls that will still have to be processed.
Senior Principle at BNY Melon speaking on PHASE 6 🙂 @AMCbiggums pic.twitter.com/2ByfVbNAO5
— RandallCornett (@RandallCornett) July 27, 2022
That's how massive this event will be.
Phase 6 margin call requirements will begin to margin a variety of sized banks, hedge funds, market makers, and family offices.
The bottom line, the markets need this reset, and its coming.
For a much greater and in-depth walkthrough of what this event means, check out AMCBIGGUM's video below.
For You: Retail Investors Petition to Fire SEC Chairman Gary Gensler
Phase 6 Margin Call Requirements meaning
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JP Morgan Manipulated Gold to Keep Hedge Funds Happy
July 14, 2022 / FrankNez
Market News: JP Morgan manipulated gold and silver market
An ex-trader says JP Morgan spoofed gold to keep hedge funds happy.
He says client orders made a lot of money for the bank.
Big hedge funds like Moore Capital Management and Tudor Capital Corp. were so important to JPMorgan Chase & Co. that its precious-metals traders routinely manipulated gold and silver markets to get the best prices on client orders, the former trader for the bank told a Chicago jury.
"They brought in a huge volume of trading, which made the bank a lot of money and our team a lot of money," John Edmonds, a former trader on JPMorgan's precious metals desk, said on Wednesday when asked about the incidents.
This isn't the first time a bank colludes with hedge funds to cheat non-institutional investors from their money.
JP Morgan manipulates gold and silver market
Gold and Silver Market
Edmonds worked on the JP Morgan precious-metals desk for more than a decade and pleaded guilty in 2018 to conspiracy and commodities fraud related to "spoof" trading. – Bloomberg
Spoofing is a term used when traders place market orders and cancels them before the order is fulfilled, initiating fake orders into the market without the intent of paying them.
Earlier this year the DOJ targeted hedge fund Muddy Waters for flooding the market with fake orders.
John Edmunds is currently testifying against his former boss, Michael Nowak, the longtime head of the trading desk, gold trader Gregg Smith and hedge funds salesman Jeffrey Ruffo.
They're accused of thousands "spoof" trades in which huge orders were placed and quickly canceled in the hope of moving prices up or down so they could complete desired trades.
Prosecutors allege the traders were influenced by the needs of hedge fund clients, whom at times were looking to buy or sell millions of dollars in gold or silver in a matter of seconds or minutes.
Edmonds said that when a client needed an order filled, everyone on the desk would stop trading so as not to "get in the way" of filing that order.
Edmonds said he'd regularly watch Nowak or Smith use spoof trades to fill those order, per Bloomberg.
Bank gets caught red-handed
JP Morgan Precious Metals Desk
Jurors were shown instant messages between Ruffo and traders at Moore Capital and Tudor, as well as Smith's trading records around those communications as evidence of improper trading in gold and silver futures.
Edmonds, who sat near Ruffo and Smith, said the hedge fund clients were "price sensitive" and concerned about even small differences in prices of gold and silver given the massive size of their orders.
One example from prosecutors was an order on Dec. 12, 2011, by Moore Capital, which sought to sell 1 million ounces of silver at $31 an ounce.
Smith placed orders to buy 1,190 futures contracts, each for 5,000 ounces of silver, data presented to the jury showed.
Edmonds said that was consistent with a spoof trade designed to drive the price higher, where Smith wanted to sell.
Minutes later, Smith sold 200 contracts, which is the equivalent to 1 million ounces, and canceled his buy orders.
The jury also heard about a Jan. 18, 2012, gold trade on behalf of Tudor where Ruffo was asked to unload more than 900 contracts.
As the price of gold decreased around 8 a.m., Tudor's James Phelan wrote to Ruffo, "tell Gregg to wake up," according to a chat log.
Shortly thereafter, Smith started entering orders on the buy side. "He was trying to move the market higher so he can sell at a higher price for an important client," Edmonds said.
Sources – Bloomberg.
Will JP Morgan face any consequences?
JP Morgan manipulated gold and silver market to keep hedge funds happy
The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago).
For the reasons explained in this Opinion, the Defendants' motion to dismiss, R. 114, is denied except for the bank fraud counts (Counts 5–7).
Those counts are dismissed.
The remainder of the Superseding Indictment survives.
You can view the entire case text, opinion, and details here.
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Related: Chicago Tribune Says Citadel Securities' Dark Pool Targets Small Investors
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Chinese Tycoon Gets Bailed Out From $8 Billion Margin Call
March 21, 2022 / FrankNez
JP Morgan bails out Chinese tycoon Xiang Guangda after receiving an $8 billion margin call for sorting Nickel – Long Metal Exchange halts continue
Chinese tycoon Xiang Guangda has been bailed out by JP Morgan after receiving a whopping $8 billion margin call.
The margin call came about as he was shorting Nickel.
The commodity short squeezed leaving the Chinese tycoon with an $8 billion margin call.
Xiang told banks he wanted to keep shorting Nickel and shrugged off suggestions to reduce his short positions, Bloomberg.
Should this even be allowed?
Let's discuss it.
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Chinese tycoon gets away with $8 billion margin call
London Metal Exchange
The tycoon whose big short bet on nickel helped trigger one of the most dramatic price spikes in history has told his banks and brokers that he doesn't intend to reduce his position, according to Bloomberg.
The London Metal Exchange halted trading in nickel after prices spiked as much as 250% in two days.
Xiang has told the roughly 10 banks that he still believes prices will fall and that he would like to keep his short position.
The LME acknowledged that short sellers weren't going to voluntarily reduce their short positions.
It said there were "considerable differences in view on the appropriate price."
Apparently big net worth short sellers make the rules.
They Chinese Tycoon secured a deal with JP Morgan and China Construction Bank that would allow it to avoid defaulting on its $8 billion margin call.
LME halts Nickel trades
The LME cancelled $4 billion in transactions as Nickel prices began to surge.
The exchange said: "Nickel will be deemed a disrupted session and all agreed trades during this session will be null and void."
In other words, they took away the 'buy' button and are allowing short sellers to either close their positions or profit on the way down.
Apparently the LME has decided to bust all Nickel trades in the "second ring session" today.
This is really nuts. They are ruining their exchange's credibility to protect some very wealthy/powerful people/firms. You can't run a market like this, busting trades at someone's whim.
— Dave Lauer (@dlauer) March 21, 2022
Dave Lauer says the exchange is ruining their credibility by protecting very wealthy and powerful people/firms.
"You can't run a market like this, busting trades at someone's whim."
The halts are similar to those that occurred last year during the 'meme stock' frenzy when Robinhood froze the purchasing of GameStop, AMC, and other heavily shorted stock.
At some point, the people will cause an uproar.
What are your thoughts on the matter?
Big banks are beginning to bail out wealthy people and firms.
What can be done about it and what should be done about it?
The Chinese tycoon is only one example, but what will happen when heavily shorted stock begin to squeeze again?
Leave your thoughts in the comment section below and share this article to raise awareness to the injustices in the markets.
Peabody Receives a $534 Million Margin Call: Goldman Steps In
Peabody Margin Call – Global margin calls will happen in every corner of the financial sector
Leading global pure-play and Fortune 500 company Peabody received a $534 million margin call.
The Australian benchmark coal price is up more than 400% in the past 12 months, hitting $425.
Peabody was not prepared and got slammed with a $534 million margin call.
The sum is more than half the cash the company had at the end of December 2021.
Margin calls are beginning to happen left and right and we're going to discuss it.
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Margin calls in the coming weeks
The Russian-Ukraine conflict is affecting global markets sparking margin calls in every corner of the finance sector.
Russia's war in Ukraine has further fueled a rally in coal driven by a squeeze on global energy supplies.
Chinese tycoon Xiang Guangda is currently facing an $8 billion margin call after Nickel prices skyrocketed to $100,000 per ton.
Xiang Guangda tells banks he has no intention in reducing his positions.
The short seller is requiring a coordinated bank bailout including the participation of JP Morgan.
The London Metal Exchange halted trading in nickel on Tuesday morning after prices spiked as much as 250% in two days, driven by brokers rushing to close out short positions after holders of bearish bets struggled to make margin calls.
Credit Suisse News: Margin call tension rises
The Swiss bank Credit Suisse is also imposing margin calls on investors exposed to Russia.
The invasion of Ukraine has left wealthy individuals invested in Russian assets with frozen accounts and demands for more collateral.
Tension really began to pick up when Russia was removed from SWIFT.
Banks in the United States are losing cash quick.
Citigroup disclosed in its annual report that it has nearly $10 billion in exposures to Russian counterparties, including loans, reverse repo agreements and cash deposits.
Morgan Stanley's next gen emerging markets fund (MFMIX) has also been exposed to Russia with nearly $16.6 million frozen due to Russian sanctions.
Schwab's fundamental emerging markets large company index ETF (FNDE) has also been affected with 12.7% being exposed to the Russian stock market.
Peabody receives a 10% loan from Goldman
Goldman Sachs steps in with 10% loan – Peabody Margin Call
Peabody shares plunged 17% after announcing the margin call, taking a chunk out of the gains they had made in recent months as the coal market boomed.
Margin calls could increase if the coal market moves higher.
Senior VP for coal markets at Rystad Energy Steve Hulton says prices could reach $500 per ton.
Peabody arranged a $150 million credit line with Goldman Sachs although the bank announced in 2019 that it would phase out financing for coal.
Peabody's margin call is only a glimpse of what's coming to various institutions in the markets worldwide.
And in the states, retail investors are waiting for hedge funds' number to be called.
Will banks be able to inject liquidity into hedge funds?
As banks and hedge funds' assets continue to lose their value, will banks be able to inject liquidity into hedge funds when they need it?
Leave a comment below with your thoughts.
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Are Hedge Funds About To Get Margin Called by JP Morgan?
JP Morgan Margin Call
According to RISK.net JP Morgan warns hedge funds of intraday margin calls. This sounds very similar to proposal 002. The U.S bank may demand margins up to "7 times per day" according to sources.
The tough love comes from the fear of losing money and covering hedge fund positions like global banks did with Archegos Capital earlier this year. It seems like they've started to notice a pattern here.
As always, I'll give you my take on what this means for us retail investors and how it plays into AMC's short squeeze news.
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Ladies and gentlemen banks have had enough. They're tired of getting screwed over by hedge funds overleveraging their short positions. When hedge funds cannot cover the entire hit, brokers have to cover the rest.
JP Morgan is trying to prevent from becoming like one of the affected brokers that suffered significant losses due to Archegos shorting Viacom and Discovery earlier this year.
Although the SEC might be oblivious to what's going on, this bank sure isn't. And if you remember, Charles Schwab has also raised margin requirements for short sellers shorting both AMC and GME stock.
Archegos meltdown resulted in billion dollar losses for global banks
Banks to massive losses due to Archegos Capital overleveraging their positions in highly shorted stock such as Viacom and Discovery.
Wells Fargo was one of the banks that did not suffer any losses. "We had a prime brokerage relationship with Archegos," the bank said. "We were well collateralized at all times over the last week and no longer have any exposure."
According the Reuters, Morgan Stanley lost nearly $1 billion dollars from the collapse of Archegos. Other banks hit were Credit Suisse Group and Nomura Holdings which were affected the most.
Global banks were expected to lose between $5-$10 billion dollars according JP Morgan. And now it seems JP Morgan is taking the precautions necessary to avoid enormous losses too. By issuing intraday margins, they make sure short sellers have enough cash at hand as collateral. This could possibly be the catalyst for what we've been waiting for.
If margin accounts cannot keep up with the daily demand for new cash in its accounts, JP Morgan may instantaneously close out overleveraged positions. This will cause AMC stock to soar.
Hedge funds and family offices are affected
Archegos was technically a family office managing billions in assets, not a hedge fund. Well now JP Morgan is demanding both hedge funds and family offices post more cash during the day if their trades loses value.
The news was provided to Risk.net by three people who are familiar with the matter. No further information aside from these intraday margin requirements were relayed by the publication.
If JP Morgan sees too much risk within some accounts, and they will, they have the power to liquidate margin accounts short selling both AMC and GME stock. The results would drive these stocks high enough to force all shorts out of their positions.
Managing margin call news expectations
It's important for the community to take into consideration that most news regarding margin calls have merely been neutral, so far.
If this JP Morgan margin call news plays in our favor then excellent! We could very well begin seeing some short covering. But if it doesn't, another catalyst will end up squeezing shorts out of their positions. This may be a new wave of volume or other brokers who do not want to risk their investments through these overleveraged hedge funds.
However, positive news like this should feed your conviction. When you're in need of strength, borrow mine.
I personally believe were getting closer to this chapter coming to an end as hedge funds continue to face serious scrutiny. Think about this for a second, the cards are against them.
Retail investors, banks, whales, and the public are all against them. I'm interested to know your thoughts, leave me a comment below. Are you ready for this short squeeze? And when do you personally think this will liftoff?
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