Traders manipulated oil prices - U.S.

Regulators claim firm attempted to 'bang the close' by amassing large positions just before markets closed.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Steve Hargreaves, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The government charged an oil trading firm Thursday with manipulating oil prices in the first complaint to be announced since the regulators began a new investigation into wrongdoings in the energy markets.

The Commodity Futures Trading Commission accused Optiver Holding, two of its subsidiaries and three employees with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures on the New York Mercantile Exchange.

"Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets," CFTC Acting Chairman Walt Lukken said at a press conference. "These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets."

In May, under the backdrop of record oil prices and calls from legislators to crack down on speculative oil trading and market manipulation, the CFTC announced a wide-ranging probe into oil price manipulation. The agency says it has dozens of investigations ongoing.

The complaint filed Thursday names Bastiaan van Kempen, chief executive; Christopher Dowson, a head trader; and Randal Meijer, head of trading at an Optiver subsidiary.

The CFTC said the firm attempted to "bang the close" by amassing large positions just before markets closed - forcing prices up - then selling them quickly to drive prices down and pocketing the difference.

The alleged manipulation was attempted 19 times on 11 days in March 2007, the agency said. In at least five of those 19 times, traders succeeded in driving prices higher twice and lower three times, according to the CFTC.

Optiver issued a written statement saying the firm had received the complaint.

"We take the Commission's action very seriously, and are treating it with utmost attention and care," said the statement. "Obviously, we cannot comment further until we have had the opportunity to review the complaint."

CFTC stressed that the price changes were small and the manipulation was isolated, and that the investigation has nothing to do with the recent heat the agency has taken on Capitol Hill over rising oil prices.

Traders in the spotlight

CFTC has repeatedly said that speculators are not to blame for rising oil prices, and any cases of price manipulation - such as the one brought Thursday - have only a small, if any, effect on oil prices.

The CFTC is the government's main regulator of commodity markets. Its officials have been hauled before Congress and asked repeatedly whether manipulation or excessive speculation is playing a role in record oil prices.

Repeatedly, CFTC experts have said they have found no evidence that speculators - investors who do not ultimately use crude oil - are to blame for the rising prices. They say trading information shows no correlation between investment activity and price swings.

Others, such as the International Energy Agency, have also said speculators are not to blame. They've pointed to other non-traded commodities that have risen in price even faster than oil, and to the fact that there is no evidence of a bubble, such as excess oil sitting around in storage.

Still, the correlation of a four-fold increase of investment money into oil futures and a four-fold increase in oil prices since 2004 has not gone unnoticed. Many lawmakers, consumer rights advocates and even some oil industry analysts say speculation is at least partly to blame.

Against that backdrop, the CFTC has been ordered to investigate the matter more thoroughly and dozens of investigations are underway. The agency may soon be given a bigger staff and wider powers under bills being debated in Congress.

Over the years, the CFTC has found isolated incidents of price manipulation - when an oil producer controls products to influence prices - or other cases of wrongdoing. Since 2002, the agency has charged 66 defendants with energy market violations.

In a recent case, BP settled a suit that alleged the company tried to corner the propane market to inflate prices in 2003 and 2004. BP agreed to pay a $303 million settlement.

But overall, most experts say the incidents are so scattered, and the energy market so large, that it's unlikely a single trader or group of traders can have substantial sway over prices.

Correction: An earlier version of the story said indictments have been brought against the company and some of its employees. The charges are civil, not criminal. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.