Optiver, High-Frequency Trading Firm, To Pay $14 Million Over Use Of 'The Hammer' To Influence Oil Prices
NEW YORK, April 19 (Reuters) - 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.
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. "Manipulative schemes like 'banging the close' harm market integrity, and false and misleading statements to exchange officials to cover tracks obstruct the investigative process."
The CFTC is expected to review HFT trading, which has come in for fierce criticism since the equity market "flash crash" in May 2010.
Better late than never... So hopefully it will finally begin... The CFTC may finally go after these greedy market-manipulators who are screwing the market and then "giving false and misleading statements to exchange officials to cover tracks obstruct the investigative process" may be exposed. And again, perhaps it's time that these corporate criminals do some prison time instead of just treating the fines as a "cost of doing business."
