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Silver traders accuse HSBC of rigging the market

Traders at HSBC and JPMorgan Chase placed "spoof" orders so as to manipulate prices in the silver market, according to lawsuits filed against the pair.

The claims from two independent silver traders follow reports that a "whistleblower" in the London office of JPMorgan has been helping regulators in the US with a two-year investigation into whether the silver market has been rigged.

HSBC and JPMorgan are among the largest players in the silver market, and they are accused of making hundreds of millions of dollars of illegal profit from violations of anti-monopoly rules. Both of the two suits, filed in the past 48 hours in New York, seek to become class actions, open to everyone who has traded silver, and are seeking damages potentially reaching into billions of dollars.

The respective plaintiffs, Brian Beatty and Peter Laskaris, each said they traded silver futures and options on the Comex commodities exchange, and lost money because of the alleged manipulation.

The banks pushed down silver prices by using so-called spoof trading orders, Mr Laskaris's suit claims, "the submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed".

Mr Beatty's suit, which cites an unnamed whistleblower, says the banks pushed prices lower to profit from big short positions. Prices have jumped 50 per cent since the large market players reduced their positions earlier this year.

The Commodities Futures Trading Commission (CFTC), which regulates futures markets, has been investigating allegations of silver market manipulation since 2008, and earlier this week one of its commissioners, Bart Chilton, said he believed that illegal trading activity has been rife. "I believe that there have been repeated attempts to influence prices in the silver markets," he said. "There have been fraudulent efforts to persuade and deviously control that price."

JPMorgan and HSBC both declined to comment on the lawsuits and the CFTC's investigation.

Since the CFTC began its investigation, silver prices have ranged between $8.42 and $24.90 an ounce, and are currently near the top of that range. "Going back to the early 1980s, silver has been an extremely volatile market," said Bill O'Neill, managing partner at Logic Advisors, a New Jersey investment firm specialising in commodities. "I often describe it as a speculative playground. You have to be a big boy to play."