CFTC Charges Optiver Holding BV with manipulation of Energy Market
7/24/2008 12:21 PM ET
Thursday morning, the U.S. Commodity Futures Trading Commission, or CFTC, charged Optiver Holding BV and two of its subsidiaries of manipulating energy futures contracts.
The CFTC revealed it had filed the civil enforcement action in the United States District Court for the Southern District of New York.
The complaint alleges that Optiver Holding BV, a global proprietary trading fund headquartered in the Netherlands, and two subsidiaries - Optiver US, LLC, a Chicago-based corporation, and Optiver VOF, a Dutch company stage-managed the energy futures contracts of New York Mercantile Exchange, or NYMEX Light Sweet Crude Oil, New York Harbor Heating Oil, and New York Harbor Gasoline during March 2007.
Commenting on the case, CFTC Acting Chairman Walt Lukken said, "These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets."
Optiver and its subsidiaries have been charged with 19 separate instances of attempted manipulation including 5 attempts where energy contracts were successfully manipulated leading to artificial price hikes and declines enabling the illegally profiteering approximately $1 million by the defendants.
According to the complaint, the defendants employed a manipulative scheme commonly known as "banging" or "marking" the close. "Banging the close" 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 for the purpose of attempting to manipulate prices.
The complaint also names defendants Christopher Dowson, head trader of Optiver US, Randal Meijer, head of trading and supervisor of Optiver US and Optiver VOF and Bastiaan van Kempen, Chief Executive Officer of Optiver, US.
The CFTC has also charged Optiver and van Kempen with concealing the manipulative scheme and making false statements in response to an inquiry from NYMEX.
"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," Lukken added.
The scheme allegedly involved trading a significant volume of energy futures contracts in the opposite direction of the associated Trading at Settlement, or TAS position, before and during the close of the contracts, thus benefiting the company regardless of its TAS position accumulated during the trading day.