U.S. regulators charge Dutch firm with oil-price manipulation

[WhiskeyGirl]

U.S. regulators charge Dutch firm with oil-price manipulation

By Kevin G. Hall

McClatchy Newspapers

Facing congressional criticism that speculators are driving up oil prices, the Commodity Futures Trading Commission (CFTC) today announced that it has charged the Dutch company Optiver Holding and its American subsidiary with manipulating the trading of contracts for future delivery of oil and gasoline.

In e-mails and phone conversations released by CFTC, Optiver's heads of U.S. and global trading talk about how they are able to "bully the market" and use similar references like "whack" or "push" or "move" the futures market.

"Today's action lets the marketplace know that the (CFTC's) Division of Enforcement has a zero-tolerance policy when it comes to gamesmanship," Stephen Obie, the agency's new acting head of enforcement, said at a news conference announcing the market manipulation charges.

The kind of manipulation being alleged doesn't appear to be large enough to explain this year's 80 percent surge in oil prices. In a preliminary report issued earlier this week, a Bush administration interagency task force led by the CFTC said it believes that supply and demand fundamentals remain the best explanation for soaring prices.

But today's action does provide ammunition to critics who insist that the lack of transparency in oil markets makes possible a wide range of practices that drive up oil prices, which in turn drive up the price motorists pay for gasoline.

The CFTC brought charges against Bastiaan van Kemp, a Dutch national who was chief executive office of Chicago-based Optiver US. It also charged Christopher Dowson, a Briton who was head of trading in Chicago at Optiver and Randal Meijer, who oversaw trading for the main Optiver holding company and all its subsidiaries.

In a series of phone recordings and e-mails obtained by CFTC enforcement officials, the executives weigh how far they can push their attempts to "bang the close" of market trading and still avoid detection by regulators. They then allegedly sought to cover up their scheme once confronted by officials at the New York Mercantile Exchange and later the CFTC, according to the charging document.

In one conversation, Dowson said the cover-up plan amounted to "a fairy (tale) story."

In another conversation, Dowson and Meijer describe their activities to "bully" the market in the last minutes of trading as "a fun game," and discuss expanding the scheme to other commodities like sugar, wheat or corn.

In yet another conversation, Dowson confides to Meijer that he is trying to build up positions but stay under the radar screen, noting "I'm also not doing it so dramatically that ... we're talking about it on CNBC (television) or things like this."

The CFTC alleges that in 19 instances over 11 days during March 2007, Optiver's global and U.S. operations attempted to manipulate the settlement price during the trading of next-month contracts for future delivery of crude oil, heating oil and New York Harbor gasoline. The three executives charged allegedly made more than $1 million from the illegal trading.

read the rest of the article here -

http://seattletimes.nwsource.com/html/businesstechnology/2008070745_weboilprice24.html

[WhiskeyGirl]

further explanation -

According to the complaint, the employees carried out a manipulative scheme known as "banging" or "marking" the close of the trading day.

That refers to the practice of acquiring a substantial position leading up to the closing period, followed by offsetting the position before the end of trading for the purpose of attempting to manipulate prices.

Optiver's Chicago office did not immediately respond to questions about the case.

The commission said the employees in three instances forced futures prices lower and in two instances caused prices to rise.

"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 CFTC began its nationwide investigation into oil market manipulation last December.

Obie said the defendants face "substantial" fines if they are found guilty, but declined to say whether any criminal charges would be filed. The agency still has "dozens and dozens" of energy cases under investigation, he said.

http://uk.reuters.com/article/governmentFilingsNews/idUKN2450661620080724?pageNumber=2&virtualBrandChannel=0

While Americans and others pay increasing prices for fuel oil, gasoline, and other necessities, I wonder if anyone will spend time behind bars...

Will these people just move on and enjoy their profits?