JPM Sheds Claims It Manipulated Silver Futures Market

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By Phyllis Diamond

Jan. 12 — J.P. Morgan Chase & Co. Jan. 12 beat back allegations by three sophisticated commodity traders that it manipulated the market in silver futures calendar spreads on the Commodity Exchange Inc. in late 2010 and early 2011.

The claims were untimely under the Commodity Exchange Act's two-year limitations period, the U.S. District Court for the Southern District of New York held.

Judge Paul A. Engelmayer also dismissed the plaintiffs' antitrust and related state-law allegations, but gave them two weeks to replead.

Anomalous Divergence

According to the plaintiffs, JPMorgan manipulated the silver futures spread market by taking large long positions in nearby silver futures months against short positions in deferred months and then placing large, uneconomic spread bids and offers just prior to close. Allegedly, the spread orders influenced settlement prices in deferred futures contracts in a manner that benefited the firm's positions.

In support of their allegations, the plaintiffs pointed to JPMorgan's high percentage of open interest in the deferred spreads, and systematic, anomalous divergence between the silver spreads market and the over-the-counter silver market, which normally should track one another.

Dismissing, the court said that while the plaintiffs' claims are subject to different two-year statutes of limitation, all three traders were on inquiry notice of the facts constituting the alleged violations approximately four years before their complaints were filed.

It also concluded that the CEA two-year limitations period wasn't tolled by the pendency of a related class lawsuit—and even if it were, the class action ended more than two years before the complaints in this case were filed.

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com