"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, March 16, 2011

Silver experiences sharp jump in EFP activity yesterday

Data released by the CME Group this morning detailing changes in open interest and volume readings from yesterday's trading session showed a rather substantial jump in what are known as Privately Negotiated Transactions. They are also generally known as Exchange for Physical or EFP's.

I have been monitoring this data for about a month now especially as silver was going into its delivery process for the March contract.

While one day a trend does not make, yesterday recorded a sharp increase in these off exchange type agreements but it was for the May contract and not the March. There were 5,934 of these conducted yesterday.

To give you a bit of perspective - over the last month, the daily average of these transactions  has been 1,433 for the May.

With rumors abounding in the silver market about shorts offering longs cash payments at a substantial premium above the current board price in lieu of standing for delivery of the physical metal, perhaps there is something to this. I would have expected this sort of activity to be showing up in the March contract however and not so much in the May at this point. At this point do not read too much into this but just note the occurence.

In the actual delivery process for the March contract, a total of 847 have been done at this point in the month with 1,079 contracts still open in that month. So far I have not seen anything that really stands out to me about these deliveries. The Bank of Nova Scotia and JP Morgan have been the largest issuers or those delivering the silver while Barclay's has been the largest stopper or the one taking the silver.

I should note that Morgan's deliveries are mainly for customers and not for the house at this point.

I will want to see tomorrow's data and preferably the rest of the week's before jumping to any conclusions however. The fact that the March contract cannot get to the sharp premium to the May contradicts both the rumors that are abounding and the jump in EFP volume.

Needless to say to the old timers - this is silver - always full of rumors and always a big mystery. It has been that way for as long as I can remember.


  1. Greetings Dan, just curious how do you know that JP Morgan and Scotia are the big issuers? Does CME have some data on that or is it an educated guess? Thanks

  2. tkemper, check out http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsReport.pdf

    Dan, could you explain the terms "issuer" and "stopper" of a delivery. And what means the column Org with C or H mean in this document?

  3. hiptwist:

    Issuer is the "short", or the supplier of said metal

    Stopper is the "long", or the receiver of said metal

  4. Dan -
    I'm still scratching my head as to what conclusions you can draw from May EFP volumes - other than that above average volumes imply that there is indeed physical silver available, as it's required to settle the EFPs.

    Again, of course, the price of the EFPs is the key, but we don't have that data.


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