The Hunt Brothers and Silver, 1980: the Corner, COMEX Silver Rule 7, Silver Thursday and the Verdict

The Hunt brothers’ silver episode was an attempt by Nelson Bunker Hunt, William Herbert Hunt and their allies to accumulate so much physical silver and so many long silver futures in 1979 that the market could not deliver what they were owed, which drove silver from under $9 an ounce in July 1979 to about $50 in January 1980. Exchange rule changes, margin increases, high interest rates and a flood of new supply then broke the price, and on March 27, 1980, “Silver Thursday,” it hit $10.80 as the Hunts failed to meet margin calls and their brokers sold them out.

In short: a corner in futures is not owning all the silver in the world. It is controlling more of the deliverable supply, and more of the open long positions, than the shorts can satisfy, so the shorts must buy back at whatever price the longs set. By late December 1979, the CFTC found that the Hunts and a second group of large longs (the “Conti group”) together owned 53% of the silver in COMEX warehouses and 69% in CBOT warehouses, while holding 57% of open interest in the March 1980 COMEX contract. COMEX answered with Silver Rule 7, which capped positions and then allowed only liquidating trades. Because the position was financed with margin and bullion loans, the price fall turned into a credit crisis for the brokers carrying it. In 1988 a federal jury found the Hunts liable for conspiring to manipulate the market.

This article relies on two primary documents: the CFTC’s Report on Recent Developments in the Silver Futures Markets, transmitted to the Senate on April 25, 1980 and printed in May 1980, and the SEC staff report The Silver Crisis of 1980, published in October 1982. For the delivery mechanics behind any squeeze, see physical vs cash settlement.

The misconception: a corner means buying everything

Silver is produced and stockpiled worldwide. The SEC staff report quotes Handy & Harman’s 1979 review: reported US silver stocks, government and private, were 339.6 million ounces, and total world stocks, reported and “conjectural,” about 1.3 billion ounces. Nobody could buy all of that.

A futures corner works through the delivery mechanism. Each COMEX silver contract calls for 5,000 troy ounces, deliverable only as approved bars in exchange-licensed vaults. If a group holds long futures for more silver than sits in those vaults, and owns much of what is there, a short who has not bought silver in advance must either find eligible metal (from the long, at the long’s price) or buy back the contract (from the long, at the long’s price). The squeeze shows up as the nearby contract trading at a premium to later months instead of the normal carry discount. The CFTC report put it in exactly those terms in a footnote: a squeezed nearby future “would be forced up relative to the prices of deferred futures.”

Who was involved

Nelson Bunker Hunt and William Herbert Hunt, sons of Texas oilman H.L. Hunt, plus other immediate family members. The CFTC report notes that the brothers had taken large deliveries on the CBOT in 1976, which CFTC staff investigated without establishing unlawful activity, and that they built net long positions from 5,393 contracts at the end of 1978 to 8,354 by the end of March 1979.
International Metals Investment Co. (IMIC), a Bermuda company. It started buying in July 1979 and held 8,400 net long contracts by the end of August. The CFTC did not then know the Hunts had an interest in it.
The “Conti group,” a set of accounts at ContiCommodity Services controlled or represented by Norton Waltuch, including Naji Robert Nahas and Banque Populaire Suisse of Geneva. On August 31, 1979 they were net long 8,560 contracts, about 26% of open interest in December 1979 COMEX silver. The CFTC’s staff treated the accounts as one entity for surveillance but “no relationship was established” between them and the Hunts at that time.

The price path

All prices are from the CFTC report and refer to COMEX silver futures (spot or named month) unless noted. Contract value is 5,000 ounces times the price.

Date	Price per ounce	Change from Jul 6, 1979	Value of one contract
Jul 6, 1979	$8.87		$44,350
Aug 31, 1979	$10.61	+20%	$53,050
Oct 12, 1979	$17.42	+96%	$87,100
Nov 30, 1979	$18.81	+112%	$94,050
Dec 31, 1979	$34.45	+288%	$172,250
Jan 18, 1980 (March future)	$46.80	+428%	$234,000
Jan 25, 1980	$33.50	+278%	$167,500
Mar 5, 1980	$36.05	+306%	$180,250
Mar 17, 1980	$17.40	+96%	$87,000
Mar 25, 1980	$20.20	+128%	$101,000
Mar 26, 1980	$15.80	+78%	$79,000
Mar 27, 1980	$10.80	+22%	$54,000

The London fix was higher than New York at the peak: $49.45 on January 18, 1980, against $8.93 on July 6, 1979, a rise of 454%. The SEC report says silver “peaked at more than $50 on January 17, 1980.” From the January 18 COMEX March price to the March 27 low, silver fell 77%. From the December 31 close it fell 69%, and it lost 47% in the last two days alone.

The buildup

Concentration

The CFTC report’s December 28, 1979 surveillance briefing is the key data point. As of December 27, the Hunts and IMIC owned 90.3 million ounces and the Conti group 28.6 million ounces of silver, together 53% of COMEX warehouse stocks and 69% of CBOT stocks. On top of that, their combined long position in the March 1980 COMEX contract was 17,787 contracts, 57% of open interest. In CFTC General Counsel Dan Berkovitz’s 2010 testimony, those March longs equalled 122% of the silver in COMEX-licensed depositories.

The SEC report adds that the Hunts’ position exceeded 195 million ounces by the end of 1979, roughly half of it in long futures, with an apparent value of about $6.6 billion at year-end prices.

Taking delivery and buying off-exchange

Unlike a speculator who rolls positions forward, these longs stood for delivery. The CFTC report lists deliveries in the September and October 1979 contracts: for example, IMIC took 1,344 contracts (6.72 million ounces) on CBOT October 1979. They also bought silver through exchanges for physicals (EFPs), swapping futures for bullion directly with dealers. On January 14, 1980, the Hunts did an EFP with Engelhard for 17.5 million ounces and one with Sharps, Pixley for 4 million; on January 16, another 11 million ounces with Engelhard. Delivery and EFPs moved silver out of the hands of the shorts and into the longs’ vaults.

The exchanges tighten

Through the autumn, CBOT and COMEX raised margins repeatedly and differentiated them by position size:

CBOT’s clearing corporation raised silver margin from $1,000 to $1,750 a contract in September 1979, then added special margins for large positions, and imposed position limits under emergency authority in October (a 600-contract limit, later made permanent).
On October 25, 1979, COMEX raised original margin to $50,000 per contract under an emergency rule. On October 30 it set a ladder for speculative positions: $10,000 a contract for 1 to 100 contracts, $20,000 for 101 to 250, $30,000 for 251 or more, with the spot month staying at $50,000.
From December 21, 1979 to January 16, 1980, CBOT raised silver margin four times, from $3,000 to $12,000.
On February 4, 1980, COMEX set $40,000, $50,000 and $60,000 a contract by position size, and $75,000 in the spot month. At $35.30 silver, $60,000 was 34% of a contract’s value.

The SEC report notes that even at the highest prevailing rates on December 30, 1979, “a $30,000 deposit margined a contract for silver worth more than $170,000.” At $34.45, that is 17.4% of value. A fall of just $6 an ounce would erase the entire deposit.

COMEX Silver Rule 7

On the evening of January 7, 1980, COMEX adopted a temporary emergency rule, Silver Rule 7. The CFTC report describes two parts:

Reporting. Any account with 100 or more silver contracts had to be reported to the exchange, measured gross, with commonly controlled accounts aggregated.
Position limits. A gross limit of 500 contracts in each of January and February 1980, effective the next day, and a net limit of 2,000 contracts in all other months, effective February 18, 1980. Accounts over the limit had to reduce. Bona fide hedges were exempt.

Two days later COMEX tightened it: no one could increase a January or February 1980 position beyond 50 contracts gross. The exchange explained it had “become concerned with respect to the concentration of very large long positions in the silver market in the hands of several entities which apparently sought to use the futures markets as a vehicle to acquire silver bullion.”

To put the limit in scale: 2,000 contracts is 10 million ounces. The Hunt and Conti March 1980 longs of 17,787 contracts (88.9 million ounces) were almost nine times that.

Prices kept rising for two weeks; London rose from $39.00 to $49.95 between January 7 and January 21. Then on January 21, 1980, COMEX delayed its silver opening to 1:30 p.m. and, under emergency authority, limited trading in all silver futures to liquidation only: no new positions, only closing trades, with narrow exceptions for delivery, EFPs and rolling existing positions. CBOT did the same the next day for its January, February and March contracts, and ordered February positions cut by 25% a week for four weeks. That ended the upward pressure from new buying. COMEX lifted liquidation-only on February 14, replacing it with a cap on new positions at 20% of the Silver Rule 7 limits. The CFTC approved the amended Silver Rule 7 as a permanent rule in April 1980.

Smaller traders complained to the CFTC that changing the rules mid-game was unfair and favoured exchange members. A CBOT trader sued the exchange and the CFTC in February 1980; the case was dismissed.

The collapse

The CFTC report attributes the fall to a shift in supply and demand that liquidation then accelerated:

Rates. The prime rate rose from 15.25% to 19.5% between February 15 and March 28, 1980, and the Federal Reserve discouraged banks from financing speculation, making it costlier to carry bullion or meet margin calls.
Supply. High prices pulled out supply faster than expected. Refiners ran at full capacity melting coins and scrap, and COMEX stocks rose by 1.6 million ounces between January 2 and March 26.
Demand. A stronger dollar, record short-term yields and industrial substitution cut demand for silver as an inflation hedge.

By mid-March the longs were cash-constrained. The SEC report says that on March 13, IMIC told Merrill Lynch it could not meet a $45 million margin call within 24 hours, and that on March 17 the Hunts told Bache they lacked cash for $44 million in margin calls and offered silver instead.

On the evening of Tuesday, March 25, 1980, Bache told William Herbert Hunt that additional margin of $135,000,000 was required. According to the CFTC report, he said he could not pay. The next day CFTC staff were told that the Hunts had about 4,000 net long contracts at Bache and that “daily margin calls in excess of $10,000,000 had been commonplace.” Chairman James Stone of the CFTC spent the afternoon of March 26 with Federal Reserve Chairman Paul Volcker, Treasury and SEC officials. W.H. Hunt told the CFTC’s executive director that all their silver had been pledged as collateral and that if the market kept falling, they “would be washed out.”

Worked example: the margin-call arithmetic

Per contract. One COMEX contract is 5,000 ounces, so each $1 move in silver is $5,000 per contract.

Bache’s daily cash drain. The SEC report says Hunt family accounts at Bache held about 4,500 contracts and Bache experienced “$22.5 million per day in charges to its clearing account” while the Hunts paid nothing. That is 4,500 x 5,000 x $1.00 = $22.5 million, which matches the $1 per ounce daily price limit the SEC report describes for May 1980 COMEX silver during much of March.

The two-day fall on 4,070 contracts. The CFTC report says the Hunts’ account at Bache was net long 4,070 contracts at the close on March 25. Marked to the spot price, the fall from $20.20 to $10.80 is $9.40 an ounce:

4,070 x 5,000 x $9.40 = $191.3 million

The $135 million call in price terms. $135,000,000 / (4,070 x 5,000) = $6.63 an ounce, roughly the margin needed to cover a further fall of that size on Bache’s position alone.

The cushion at the six broker-dealers. The SEC staff found that at year-end 1979, six SEC-registered broker-dealers carried 17,444 long Hunt contracts (87.2 million ounces) and held 14.9 million ounces of Hunt bullion as collateral for $127 million of loans. Equity in those accounts was $1.1 billion. Across 102.1 million ounces, that is $10.77 an ounce, or 31% of the $34.45 year-end price, matching the SEC’s description of “an $11 per ounce, or 31%, price decline” cushion. Silver then fell $23.65 from that level. Meanwhile, the SEC notes, the average daily price swing had risen from about 1.2% in August 1979 to 9% in January 1980: at 9% a day, a 31% cushion is about three and a half average days of adverse moves.

Why the accounts looked healthier than they were. Back months were limit-down while the spot month fell freely. On March 27 the spot price was $13.26 below the average back-month price, the SEC report says. Industry practice let brokers value customer positions at back-month settlement prices, which “assigned an unrealistically high apparent value” to the Hunt accounts. On 4,070 contracts, a $13.26 gap would be about $270 million of value that existed only on paper.

Liquidation and refinancing

Bache sold about $100 million of the Hunts’ bullion collateral on March 26, liquidated 636 contracts on March 27 and 3,316 more on March 28, leaving 38 contracts, the CFTC report records. Other brokers sold out their Hunt accounts at or near spot prices. On March 26, COMEX cut silver margin requirements by one third at Bache’s request, which the SEC staff said freed about $80 million for Bache. The SEC report later criticised this, warning that exchanges could “manipulate margin requirements to benefit particular market participants.”

At the time of the default, the Hunts’ silver-related obligations, excluding futures margin, were about $1.75 billion, including a $432 million installment due March 31 to Engelhard for 28.5 million ounces. They refinanced through Placid Oil Company, owned by Hunt family trusts, which borrowed $1.1 billion from a consortium of 13 banks. Engelhard took interests in Beaufort Sea oil licences and kept collateral silver to settle a $702 million obligation.

Segregated customer funds held up. The CFTC report says that at Bache on March 28, segregated customer accounts held $278.9 million against a requirement of $263.7 million, and that during January the Commission and exchanges “found that customer funds were properly segregated at all times.”

The court and regulator findings

The CFTC’s 1980 report was explicit that it “does not contain any conclusions concerning the legality” of anyone’s conduct, and noted that its Division of Enforcement had a major investigation under way.

The decisive legal finding came in private litigation. Minpeco, S.A., a Peruvian state mineral marketing company that had lost heavily on short silver futures, sued the Hunts and others in the Southern District of New York (81 Civ. 7619). Several brokers and other defendants settled before trial for about $64.7 million, UPI reported. On August 20, 1988, after six days of deliberation, a six-member jury found Nelson Bunker Hunt, William Herbert Hunt, Lamar Hunt, IMIC and Mahmoud Fustok liable. UPI reported that all except Lamar Hunt were found to have violated the federal racketeering law, while Lamar was found liable under fraud, commodities and antitrust law. The jury’s damages, trebled under the antitrust and racketeering statutes and reduced by the earlier settlements, came to more than $130 million, and judgment was entered for more than $132 million. In a decision of July 18, 1989 (718 F. Supp. 168), Judge Morris Lasker denied Nelson Bunker and William Herbert Hunt’s motions for judgment notwithstanding the verdict or a new trial; by then the two brothers had filed for personal bankruptcy (September 1988) and Lamar Hunt had settled.

Lessons for position limits

What changed after 1980

The episode turned speculative position limits from an exchange emergency tool into a standing requirement. According to Berkovitz’s 2010 testimony, the CFTC in 1980 rejected an advisory committee’s recommendation to replace limits with monitoring and proposed limits for silver and other contracts (45 Fed. Reg. 79831, December 2, 1980). The final rule (46 Fed. Reg. 50938, October 16, 1981) required exchanges to set speculative limits for contracts without federal ones, and Congress in 1982 confirmed exchanges’ power to set limits no higher than the Commission’s.

The modern framework is covered in position limits and large trader reporting. For metals, the CFTC’s position limits rule adopted October 15, 2020 sets a federal spot-month limit of 3,000 contracts (15 million ounces) for COMEX silver, with federal spot-month limits generally set at or below 25% of estimated deliverable supply. The 1980 March longs of 17,787 contracts were nearly six times that figure, before counting physical holdings.

What professionals took from it

Concentration risk sits with the broker. The SEC staff’s central finding was that broker-dealers let a single customer group build positions “very substantial in relation to the capital resources of the firms.” Bache’s excess net capital at the end of February 1980 was about $38 million against a customer group generating $22.5 million a day in unpaid charges. Clearing members now run large-trader concentration limits and stress tests for exactly this reason (see how clearing houses work).
Mark to the realisable price. The limit-down valuation gap led the SEC staff to recommend marking accounts to the spot market when price limits bind, a fix the report says COMEX adopted for customer margin.
Margin is a policy lever and a liquidity shock. Raising silver margin from $1,000 to $60,000 a contract curbed the corner, but it also forced cash out of every long at once. Higher margins and liquidation-only rules, the CFTC report acknowledged, may have added to illiquidity on the way down. The same trade-off reappears whenever exchanges raise margin into a volatile market.
Know the whole position. Brokers carried Hunt positions “with no clear idea of the extent of their potential exposure,” the SEC report said, because nobody saw the positions at other firms or the bullion loans. Large-trader reporting and aggregation rules exist so that the regulator, at least, does.

The short version

In 1979 the Hunt brothers, IMIC and the Conti group built a position in silver futures and bullion that by late December controlled 53% of COMEX and 69% of CBOT warehouse stocks and 57% of March 1980 COMEX open interest, while silver rose from $8.87 to over $46 on COMEX. Margin hikes, COMEX Silver Rule 7’s position limits and liquidation-only trading from January 21, 1980 stopped new buying; high interest rates and new supply did the rest. Silver fell to $10.80 on March 27, 1980, and a $135 million margin call at Bache went unpaid; on Bache’s 4,070 contracts alone, the last two days’ fall was worth $191 million. A $1.1 billion bank loan through Placid Oil contained the damage, and in 1988 a jury found the Hunts liable to Minpeco. The episode is the reason speculative position limits, large-trader aggregation and broker concentration limits are standard practice today. This is a historical account, not trading advice.