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CFTC charges firm with energy futures manipulation
Optiver Holding BV allegedly profited by about $1 million from scheme
By Polya Lesova, MarketWatch
Last Update: 1:03 PM ET Jul 24, 2008
NEW YORK (MarketWatch) -- The U.S. Commodity Futures Trading Commission said Thursday it has charged Optiver Holding BV with manipulation of crude oil and other energy futures contracts from which the firm reaped profits of approximately $1 million.
CFTC has charged Optiver, a Netherlands-based global proprietary trading fund, two of its subsidiaries and three employees, with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures contracts listed on the New York Mercantile Exchange in March 2007.
The regulator has filed the civil enforcement action in the U.S. District Court for the Southern District of New York against Optiver Holding BV and two subsidiaries -- Optiver US, LLC, a Chicago-based corporation, and Optiver VOF, a Dutch company.
The complaint also named defendants Christopher Dowson, head trader of Optiver; Randal Meijer, head of trading and supervisor of Optiver and Optiver VOF; and Bastiaan van Kempen, chief executive officer of Optiver.
The complaint charged all defendants with 19 separate instances of attempted manipulation involving the energy futures contracts on 11 days in March 2007.
In at least five of those 19 attempts, the defendants successfully manipulated certain energy futures contracts, causing artificial prices, CFTC alleged.
"Although this alleged energy trading scheme lasted only several days in March 2007, even short-term distortions of prices will not be tolerated by the Commission," said CFTC Acting Chairman Walt Lukken.
The defendants used a scheme known as "banging" or "marking" the close, which refers to the practice of acquiring a substantial position leading up to the closing period, followed by offsetting the position before the end of the close of trading in an attempt to manipulate prices, according to the CFTC complaint.
On March 19, 2007, van Kempen told an Optiver trader: "You should milk it for right now because you never know how long it's going to last," according to CFTC.
In a separate conversation, Dowson said that with 1,000 gasoline contracts, one could "really bully" the market. Meijer added that "you can bully around more with more."
The complaint also charged Optiver and van Kempen with concealing the scheme and making false statements in response to an inquiry from the Nymex.
Acting Enforcement Director Stephen Jay Obie said at a news conference on Thursday that "these [Optiver's] manipulations had an impact on the market. At this point, we're not in a position to quantify the impact on the market."
"This is not a politically motivated case," Obie said. "What we're going after are manipulators of our markets. We pursue all manipulators."
The charges against Optiver come at a time when speculation in the oil markets has come under increasing scrutiny by regulators as American consumers struggle to pay their ever-rising gas bills. Oil futures prices have soared by 70% over the past 12 months, and are currently trading near $124 a barrel.
Earlier this week, the CFTC said that fundamental supply and demand factors, not speculation, provide the best explanation for the recent surge in oil prices and the increase in oil prices over the past five years.
"Activity on the crude oil futures market -- as measured by the number of contracts outstanding, trading activity, and the number of traders -- has increased significantly," said the Interim Report on Crude Oil produced by the Interagency Task Force on Commodity Markets, which is chaired by the CFTC.
"While these increases broadly coincided with the run-up in crude oil prices, the task force's preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices," the report said.
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