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COMEX and ICE Gold Vault Reports Both Overstate Eligible Gold Inventory

by Ronan Manly, BullionStar:

Introduction

In the world of gold market reportage, much is written about gold futures prices, with the vast majority of reporting concentrating on the CME’s COMEX contracts. Indeed, when it comes to COMEX gold, a veritable cottage industry of websites and commentators makes its bread and butter commentating on COMEX gold price gyrations and the scraps of news connected to the COMEX. The reason for the commentators’ COMEX fixation is admittedly because that’s where the trading volume is. But such fixation tends to obscure the fact that there is another set of gold futures contracts on ‘The Street’, namely the Intercontinental Exchange (ICE) gold futures contracts that trade on the ICE Futures US platform.

These ICE gold futures see little trading volume. Nonetheless, they have a setup and infrastructure rivaling that of COMEX gold futures, for example, in the reporting of the gold inventories from the vault providers that have been approved and licensed by ICE for delivery of gold against its gold futures contracts.

At the end of each trading day, both CME and ICE publish reports showing warehouse inventories of gold in Exchange licensed facilities/depositories which meet the requirements for delivery against the Exchanges’ gold futures contracts. These inventories are reported in two categories, Eligible gold and Registered gold. Many people will be familiar with the COMEX version of the report. A lot less people appear to know about the ICE version of the report. For all intents and purposes they are similar reports with identical formats.

Most importantly, however, both reports are technically incorrect for the approved vaults that they have in common because neither Exchange report takes into account the Registered gold reported by the other Exchange. Therefore, the non-registered gold in each of the vaults in common is being overstated, in a small way for COMEX, and in a big way for ICE. And since COMEX and ICE have many approved vaults in common, technically this is a problem.

The Background

Before looking at the issues surrounding the accuracy of the reports, here is some background about CME and ICE which explains how both Exchanges ended up offering gold futures contracts using vaults in New York. The Commodity Exchange (COMEX) launched gold futures on 31 December 1974, the date on which the prohibition on private ownership of gold in the US was lifted. In 1994, COMEX became a subsidiary of the New York Mercantile Exchange (NYMEX).

In 2001, Euronext acquired the London International Financial Futures and Options Exchange (LIFFE) to form the Euronext.LIFFE futures exchange. In April 2007, NYSE and Euronext merged to form NYSE Euronext. Following the merger with NYSE, this merged futures exchange was renamed NYSE Liffe US.

In July 2007, Chicago Mercantile Exchange (CME) merged with the Chicago Board of Trade (CBOT) and CME and CBOT both became subsidiaries of ‘CME Group Inc’. CBOT had traded a 100 oz gold futures contract from 2004 and a ‘CBOT mini-sized’ gold futures contract (33.2 ozs) from 2001. During 2007, NYSE Euronext had also been attempting to acquire CBOT at the same time as CME.

In August 2008, the CME Group acquired NYMEX (as well as COMEX), and NYMEX (including COMEX) became a fully-owned subsidiary of holding company CME Group Inc. Just prior to acquiring NYMEX/COMEX and its precious metals products, the CME sold the CBOT products to NYSE Euronext in March 2008. This included the CBOT 100 oz and mini gold futures contracts, and the CBOT options on gold futures. NYSE Euronext then added these gold contract products to its NYSE Liffe US platform.

In 2013, ICE acquired NYSE Liffe. In mid 2014, ICE transferred the NYSE Liffe US precious metals contracts to its ICE Futures US platform. ICE then spun off Euronext in 2014. ICE Futures US had been formerly known as the New York Board of Trade (NYBOT). ICE had acquired NYBOT in January 2007 and renamed it as ICE Futures US in September 2007.

Both COMEX and ICE Futures US are “Designated Contract Markets” (DCMs), and both are regulated by the Commodity Futures Trading Commission (CFTC). Any precious metals vault that wants to act as an approved vault for either COMEX or ICE, or both, has had to go through the COMEX / ICE approval process, and the CFTC has to be kept in the loop on these approvals also.

The Vault Providers

For its gold futures contracts, COMEX has approved the facilities of 8 vault providers in and around New York City and the surrounding area including Delaware. These vaults are run by Brink’s, Delaware Depository, HSBC, International Depository Service (IDS) Delaware, JP Morgan Chase, Malca-Amit, ‘Manfra, Tordella & Brookes’ (MTB), and The Bank of Nova Scotia (Scotia). Their vault addresses are:

Brinks Inc: 652 Kent Ave. Brooklyn, NY and 580 Fifth Avenue, New York, NY 10036
Delaware Depository: 3601 North Market St and 4200 Governor Printz Blvd, Wilmington, DE
HSBC Bank USA: 1 West 39th Street, SC 2 Level, New York, NY
International Depository Services (IDS) of Delaware: 406 West Basin Road, New Castle, DE
JP Morgan Chase NA: 1 Chase Manhattan Plaza, New York, NY
Malca-Amit USA LLC, New York, NY (same building as MTB)
Manfra, Tordella & Brookes (MTB): 50 West 47th Street, New York, NY
Scotia Mocatta: 23059 International Airport Center Blvd., Building C, Suite 120, Jamaica, NY

Malca-Amit and IDS of Delaware were the most recent vault providers to be approved as COMEX vault facilities in December 2015/January 2016.

ICE has approved the facilities of 9 vault providers in and around New York City and the surrounding area including Delaware and also Bridgewater in Massachusetts. A lot of the ICE vaults in New York and the surrounding region were approved when its gold futures were part of NYSE Liffe. The ICE approved vaults are run by Brink’s, Coins N’ Things (CNT), Delaware Depository, HSBC, IDS Delaware, JP Morgan Chase, MTB, Loomis, and Scotia. From these lists you can see that Malca-Amit is unique to COMEX, and that CNT and Loomis are unique to ICE. The addresses of CNT and Loomis are as follows:

CNT Depository in Massachusetts: 722 Bedford St, Bridgewater, MA 02324
Loomis International (US) Inc: 130 Sheridan Blvd, Inwood, NY 11096

There are therefore 10 vault providers overall: Brink’s, CNT, Delaware Depository, HSBC, IDS Delaware, JP Morgan, Loomis, Malca-Amit, MTB, and Scotia. Three of the vaults are run by security transport and storage operators (Brink’s, Malca, and Loomis), three are owned by banks (HSBC, JP Morgan and Scotia), three are parts of US precious metals wholesaler groups (MTB, CNT and Dillon Gage’s IDS of Delaware), and one Delaware Depository is a privately held precious metals custody company.

Importantly, there are 7 vault provider facilities common to both COMEX and ICE. These 7 common vault providers are Brink’s, Delaware Depository, HSBC, IDS Delaware, JP Morgan, MTB, and Scotia.

The Inventory Reports

Each afternoon New York time, CME publishes a COMEX ‘Metal Depository Statistics’ report for the previous trading day’s gold inventory activity, which details gold inventory positions (in troy ounces) as well as changes in those positions within its approved vault facilities at Brink’s, Delaware Depository, HSBC, IDS Delaware, JP Morgan, Malca-Amit, MTB and Scotia. The COMEX report is published as an Excel file called Gold_Stocks and its uploaded as the same filename to the same CME Group public directory each day. Therefore it gets overwritten each day:

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