Is The CME Preparing For An Eventual Comex Default? (what do you THINK is going to happen when SGE opens on Tuesday )
"The CME curiously reported that it received notice from the Federal Reserve that it is authorized to open an account at the Fed which would “allow it to better safeguard cash deposited by its traders” CME/Fed Account.
This is event is notable for several reasons. First and foremost is the fact that the CME was designated as a “systematically important” financial institution as part of the Dodd-Frank “hoodwink the taxpayer” Act. If anyone can explain to me why a corrupted derivatives clearinghouse and trading exchange is “systematically important,” I will receive the explanation with an open mind.
To be quite frank, no bank is systematically important, especially the big banks which are continuously wrist-slapped for committing criminal acts of fraud and screwing the public. As has been demonstrated, the “systematically important” designation is nothing more that a guarantee to the banks that Taxpayer money will be tapped to ensure bonus payments may remain uninterrupted in the event of a bank collapse.
Another puzzling aspect of the CME’s decision to open a custodial account at the Fed is in the CME’s statement that the Fed account will allow it to better “safeguard” cash deposited by its traders. Note that the account is limited to “clearing members proprietary margin” accounts. This would be the cash put up by Comex clearing members – like the Too Big To Fail Banks (JP Morgan, Goldman, Citi, HSBC etc) – against margin requirements.
Why is a Fed custodial account any better than a custodial account held by a big bank? Is this an unintended signal from the Fed that the big banks are no longer safe as custodians of cash deposits?
To me this reeks of the CME enabling a mechanism that “ring-fences” any cash equity put up by clearing members for the purposes of protecting that cash against an event of default or bankruptcy. It would give the CME control over this cash. This is what occurred when Jon Corzine incinerated MF Global and JP Morgan was able to grab any and all available collateral for its own benefit.
Again, this suggests to me that CME is concerned about the risk embedded in the proprietary futures and derivatives positions of its clearing members. I would suggest that the CME is specifically nervous about the precious metals futures positions held by JP Morgan, HSBC and Scotia.
With the absurd imbalance between Comex gold/silver contracts and the amount of underlying physical gold/silver bars held at the Comex for delivery, it’s not a question of “if” the Comex eventually defaults but a question of “when.” Anyone who disagrees with this assertion is either in a state of pathetic denial or appalling ignorance.
Don’t forget that Comex contracts have a “force majeur” provision which enables the cash settlement of these contracts. Given that the outrageously large short positions in gold and silver futures contracts are primarily held by the big banks, who also happen to be clearing members, the move by the CME to ring-fence cash collateral at the Fed which is deposited by the big banks who are short gold/silver futures expressly suggests that an event of default may be closer than any of us realizes."
China's yuan gold benchmark to launch with 18 members -source
"Top Chinese banks and gold miners, along with the world's biggest jewellery retailer, will be among 18 members taking part in Beijing's new yuan-denominated gold benchmark, a source familiar with the matter said.
Two foreign banks will also join the benchmark-setting process, when it launches on April 19, marking China's biggest step to become a price-setter for gold.
As the world's top producer, importer and consumer of gold, China has baulked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.
A yuan gold fix is not expected to pose an immediate threat to the gold pricing dominance of London and New York, but it could ultimately give Asia more power, particularly if the Chinese currency becomes fully convertible.
Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China , China Construction Bank and Bank of Communications are among the ten Chinese banks that will participate, said the source, who declined to be identified because he was not authorised to speak to the media.
Two foreign banks would also join, the source said, without naming them.
Chow Tai Fook, the world's biggest jewellery retailer, Swiss trading house MKS, Chinese miners China National Gold Group and Shandong Gold Group will also be members, the source said.
MKS confirmed it was taking part, while Chow Tai Fook declined to comment.
The other companies were not immediately available for comment.
The Chinese benchmark price will be derived from a 1 kg-contract to be traded on the state-run Shanghai Gold Exchange (SGE), which will act as the central counterparty.
The price, to be quoted in yuan per gram, will be set twice a day based on a few minutes of trading in each session.
SGE was not immediately available for comment.
The spot benchmark in London is set via a twice-daily auction on an electronic platform with 12 participants after starting off with six.
The London fix, which was previously set via a teleconference among banks, was replaced by electronic auctions after a shake-up in benchmark setting following a scandal over rigging of the Libor interest rate broke in 2012.
Support from foreign banks will be crucial for the international use of the yuan benchmark, but China has struggled to get them to sign up due to sensitivity around benchmarks amid scrutiny by regulators.
Reuters reported in January that China had warned foreign banks it could curb their operations in the domestic market if they refuse to participate in the benchmark-setting process.
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