How COMEX Killed a Silver Corner With One Rule

By January 1980, Nelson Bunker Hunt and Herbert Hunt sat on roughly 100 million troy ounces of silver — a position large enough that the Britannica entry credits them with control of about a third of the world's non-government supply. They had bought it the slow way, then the fast way: physical bars stashed in Swiss vaults, and futures contracts they kept rolling forward instead of cashing out. The price went from about $6 an ounce in early 1979 to a peak of $49.45 on January 18, 1980. Tiffany's eventually took out a newspaper ad calling the hoarding unconscionable.

The COMEX board didn't write an ad. On January 7, 1980, it passed Silver Rule 7, which raised margin requirements and, crucially, banned the opening of any new long positions in silver futures. Existing longs, including the Hunts, were frozen. Existing shorts could keep selling. The exchange had quietly closed one side of the market.

With no new buyers allowed in, the price had nowhere to go but down. By late March, silver had lost more than half its value in four days. The Hunts were leveraged, and a $100 million margin call hit that they could not meet. On Thursday, March 27, the price closed near $10.80. A consortium of U.S. banks, with Federal Reserve approval, eventually extended a $1.1 billion line of credit to wind the position down without taking the brokerage Bache Halsey Stuart Shields with it.

The lesson the regulators drew wasn't really about silver. It was that an exchange could break a corner without a single arrest, just by changing what trades it would clear. The Hunts kept arguing for years that they were investors, not manipulators. The rule didn't care.