MANHATTAN (CN) – A Netherlands-based trading fund and its U.S. branch manipulated the price of light sweet crude oil on the New York Mercantile Exchange in 2007, the Commodity Futures Trading Commission claims in Federal Court. It sued Optiver Holding, two affiliates and three of executives today, claiming they tried to “bully the market” at least 19 times, and succeeded at least five times.
Named as defendants are Optiver US LLC, Optiver Holding BV, Optiver VOF, CEO Bastiaan Van Kempen, and traders Christopher Dowson and Randal Meijer.
“On at least 19 separate instances during the month of March 2007, Optiver, Optiver Holding, and Optiver VOF, led by head traders, defendant Christopher Dowson and defendant Randal Meijer, repeatedly attempted to manipulate market prices – or in Dowson’s own words, ‘bully the market’ – for the above-referenced energy contracts towards the end of the trading day,” the complaint states. “The manipulative strategy employed … is commonly known as ‘hanging the close’ or ‘marking the close.’
“On at least five of the nineteen instances, defendants succeeded in their manipulative scheme by causing artificial prices in certain of these energy futures contracts, resulting in serious harm to other market participants and, ultimately, to the public at large.
“The defendants’ scheme involved trading a large volume of crude oil, heating oil, and New York Harbor gasoline futures contracts to manipulate the futures prices for these contracts, including the settlement price which is based on the volume weighted average price of trades during the two minutes prior to the 2:30 p.m. closing bell.
“Defendants developed a scheme by which Optiver, having accumulated a large net TAS (defined below) position, traded a significant volume of futures contracts in the opposite direction, before and during the close, with the goal to improperly influence and affect the price of futures contracts in crude oil, heating oil, and New York Harbor gasoline. Defendants’ strategy was to execute approximately 20-30% of Optiver’s futures trades just before the close and the remainder during the close … exercising their market power to improperly influence and affect the price of futures contracts in a desired direction.
“The defendants’ intent is well documented by their own emails and phone recordings which discuss their efforts to ‘hammer,’ ‘influence,’ ‘push,’ ‘move,’ ‘whack,’ and bully the prices of futures contracts in crude oil, heating oil, and New York Harbor gasoline.
“As a result of the manipulative trading schemes, Optiver reaped profits of over $1 million.”
Optiver is based in Chicago, a wholly owned subsidiary of Optra Curacao, which is wholly owned by Optiver Holding. It trades commodity futures and options, and stock and stock options.
“TAS” means “trading at settlement.”
The 51-page federal lawsuit includes 10 more pages, citing defendants’ emails and other documents.