Posted by AzBlueMeanie:
U.S. regulators claimed their first victory in a four-year old effort to crack down on oil market manipulation on Thursday, announcing a $14 million settlement with high-frequency trading firm Optiver. High-frequency trader Optiver pays $14 million in oil manipulation case:
In a ruling that came just two days after U.S. President Barack Obama proposed a renewed campaign against illegal oil trading schemes, the Amsterdam-based company agreed to disgorge $1 million in profits and pay a $13 million civil penalty over allegations it used a rapid-fire tool nicknamed "The Hammer" to influence U.S. oil prices in 2007.
It was the first case brought by the Commodity Futures Trading Commission (CFTC) in its 2008 effort to curb market malfeasance, launched as prices soared toward a record near $150 a barrel in the middle of that year.
The case alleged that traders in Optiver's Chicago office reaped a $1 million profit by engaging in a practice called "banging the close", in which the firm attempted to move U.S. oil prices by executing a large volume of deals during the final moments of trading.
While far from the agency's largest fine, the case was viewed as an important milestone in the CFTC's efforts to get more aggressive over market manipulation - a charge that has historically been difficult to prove, despite mounting political pressure to take rogue traders to task.
"The CFTC will not tolerate traders who try to gain an unlawful advantage by using sophisticated means to drive oil and gas futures prices in their favor," David Meister, the CFTC's enforcement chief, said in a statement.
Optiver, which neither admitted nor denied the CFTC's allegations as is common in settlement cases, said it was "pleased to put this matter behind it".
The settlement bars traders Christopher Dowson, Randal Meijer and Bastiaan van Kempen from trading commodities for eight years, four years and two years, respectively. Two of the three defendants have since left the firm.
The order also limits the entire company from trading U.S. oil futures in the three minutes prior to the market close for the next two years.
The fine is less than the $19.3 million that Optiver had set aside for the case in its 2010 annual report.
Optiver, founded as a one-person operation by options trader Johann Kaemingk in Amsterdam in 1986, is considered a pioneer within the close-knit high-frequency and algorithmic trading communities of Amsterdam and Chicago.
It has more than 600 employees worldwide, including offices in Sydney, and says on its website it has "never had a loss-making year". The firm trades only with its own capital, and doesn't have any clients.
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The CFTC complaint said Optiver and van Kempen made false statements to New York Mercantile Exchange (NYMEX) compliance officials in an effort to conceal the manipulative scheme.
The defendants had attempted to manipulate NYMEX U.S. crude oil, gasoline and heating oil contracts on the 19 separate times during 11 days in March 2007, according to the complaint.
"Those who seek to manipulate oil or other commodity markets should know we aren't messing around," said CFTC Commissioner Bart Chilton. "You manipulate, we are going after you."
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President Obama on Tuesday called on lawmakers to raise civil and criminal penalties on individuals and companies involved in manipulative practices.
But while the CFTC was keen to trumpet the Optiver settlement on Thursday, the long wait between the alleged manipulation and a settlement illustrates the difficulties faced by regulators.
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The settlement was approved on Thursday by Chief Judge Loretta Preska of the U.S. District Court in Manhattan.
The case is CFTC v. Optiver US LLC et al, U.S. District court, Southern District of New York, No. 08-06560.
UPDATE: Did you hear about this? The Minnesota Loon, Michele Bachmann is back, thanks to an interview with a Florida conservative web site wherein she accused the president of “waving a tar baby in the air” by criticizing oil speculators. Bachmann’s “Tar Baby”:
Most obviously, Ms. Bachmann is using this term without having a clue of its derivation and meaning, which is interesting in that it came in the midst of a tirade accusing the president of ignorance.
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[I]t’s not terribly hard for anyone to understand that it’s a poor choice of words to use when denouncing the first African-American president. Perhaps she should have even been aware that Mitt Romney, the man she will soon be praising to the high heavens as America’s salvation, got into some hot water for using the very same term—more accurately, and in a context that did not specifically involve any people of color—back in 2009. Romney quickly apologized for the gaffe, but I’ll bet you Bachmann won’t.
What is it with all these Tea-Publicans who like to use the "tar baby" phrase? This happens with such regularity that it cannot be chance, but appears to be habit.