Bring on the Volcker Rule
In the wash up of the GFC it was agreed that a rule would be introduced to prevent US banks from making speculative investments that do not benefit their customers, or proprietary trading. This practice was blamed in large part for the GFC. A report this week detailing trades on Comex showed that on Wednesday (as just one of many examples) of the 328 gold contract posted for delivery on Comex, 300 of these were JP Morgan covering shorts out of its client account. Who do you think in bought all these longs?.... JP Morgan with their in house (proprietary) account! So in simple terms they get their clients to go short, force down the price, and then pick up nicely priced contracts to go long on, riding the price up. We are now 5 years since the GFC and they still haven’t enacted the so called Volcker Rule. The recent London Whale fiasco highlighted again the need. They vote on it next week.