Post by Sapphire Capital on Jul 24, 2008 23:46:32 GMT 4
July 24 (Bloomberg) -- The U.S. Commodity Futures Trading Commission, under pressure from Congress to regulate markets in the wake of record oil prices, accused Optiver Holding BV of manipulating U.S. energy markets.
The allegations against the Amsterdam-based hedge fund come as the Senate prepares to vote as early as tomorrow on legislation to curb speculation in energy markets and expand the commission's authority and staffing.
``Congress is looking for someone to blame,'' said Kevin Book, senior vice president for Friedman, Billings, Ramsey & Co. Inc. in Arlington, Virginia. ``The CFTC is trying to make sure it's not them.''
Crude oil futures reached $147.27 a barrel on July 11 on the New York Mercantile Exchange. Prices have fallen 15 percent since that high, dropping to $124.44 a barrel yesterday, the lowest close since June 4. Crude oil for September delivery rose 74 cents to $125.18 a barrel at 1:57 p.m. today on the Nymex.
The commission took what it called the ``extraordinary step'' earlier this year of publicly stating it had begun a nationwide investigation last December into trading, transportation, storage and purchase of crude oil. This is the first enforcement action to arise from that investigation.
``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,'' Walter Lukken, acting CFTC chairman, said in Washington. A spokesman for Optiver in Chicago couldn't immediately be reached for comment.
`Bully the Market'
The commission's complaint alleges the Dutch trading firm tried to ``bully the market'' by buying and selling large volumes of futures contracts in the closing minutes of a trading day to influence prices. The alleged scheme resulted in a $1 million profit for the defendants, the commission said.
The commission alleged Optiver, along with two of its subsidiaries and three employees, tried on 19 separate instances to manipulate energy futures markets, specifically New York Mercantile Exchange light sweet crude oil, New York Harbor heating oil and New York Harbor gasoline markets.
At least five of those attempts were successful, ``causing artificial prices,'' the commission said. The schemes forced prices both higher and lower, Stephen Obie, acting director of enforcement for the commission, said at a press conference today.
In two instances, on March 16 and March 19, Optiver was successful in moving the price of light sweet crude, also known as West Texas Intermediate, up 79 cents and down 49 cents, according to the commission.
Optiver was founded in 1986, and says on its Web site it's the largest derivatives trading group on the Australian Stock Exchange and the Amsterdam exchanges.
Chief Executive Named
Bastiaan van Kempen, chief executive officer of Optiver, is one of the employees named in the complaint filed today by the commission in the U.S. District for the Southern District of New York. The commission alleges van Kempen concealed the manipulation and made false statements to Nymex.
The other employees, who were in charge of trading at Optiver, were recorded on a phone call ``acknowledging that their manipulative scheme was `a fun game' and contemplating whether or not they could expand it to other markets, including `soft' commodities such as sugar, wheat or corn,'' the commission said in the complaint.
A spokesman for Optiver was not immediately available for comment, according to a woman answering phones in the company's Chicago office.
`Substantial' Fines
The company and its employees face ``substantial'' fines if the charges are proven, Obie said. He declined to say whether any criminal charges would be filed.
Senate Republican Leader Mitch McConnell of Kentucky praised the commission's action.
``As the Senate considers energy-related proposals, we must take great care to ensure that any speculation proposals not have the effect of driving trades to overseas markets -- and away from the oversight of the CFTC -- as the proposal now before the Senate would do,'' McConnell said in a statement.
The Senate may vote tomorrow on its anti-speculation legislation, and the House Agriculture Committee is meeting today on changes it wants to make to the commission's underlying authority. Obie denied that the timing of the announcement was politically motivated.
Speculation Concern
``The notion that financial players can alter one of the bulwarks of global crude pricing may play into overwrought concerns that speculation can contribute to price inflation,'' said Book.
Since December 2002, the commission, before today, had filed 41 enforcement actions charging a total of 66 defendants with energy market violations. Civil penalties to settle the actions have totaled almost $500 million, the CFTC said earlier in a statement.
BP Plc last October agreed to pay $303 million, the agency's largest-ever settlement, to resolve the commission's claims it manipulated the U.S. propane market.
The allegations against the Amsterdam-based hedge fund come as the Senate prepares to vote as early as tomorrow on legislation to curb speculation in energy markets and expand the commission's authority and staffing.
``Congress is looking for someone to blame,'' said Kevin Book, senior vice president for Friedman, Billings, Ramsey & Co. Inc. in Arlington, Virginia. ``The CFTC is trying to make sure it's not them.''
Crude oil futures reached $147.27 a barrel on July 11 on the New York Mercantile Exchange. Prices have fallen 15 percent since that high, dropping to $124.44 a barrel yesterday, the lowest close since June 4. Crude oil for September delivery rose 74 cents to $125.18 a barrel at 1:57 p.m. today on the Nymex.
The commission took what it called the ``extraordinary step'' earlier this year of publicly stating it had begun a nationwide investigation last December into trading, transportation, storage and purchase of crude oil. This is the first enforcement action to arise from that investigation.
``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,'' Walter Lukken, acting CFTC chairman, said in Washington. A spokesman for Optiver in Chicago couldn't immediately be reached for comment.
`Bully the Market'
The commission's complaint alleges the Dutch trading firm tried to ``bully the market'' by buying and selling large volumes of futures contracts in the closing minutes of a trading day to influence prices. The alleged scheme resulted in a $1 million profit for the defendants, the commission said.
The commission alleged Optiver, along with two of its subsidiaries and three employees, tried on 19 separate instances to manipulate energy futures markets, specifically New York Mercantile Exchange light sweet crude oil, New York Harbor heating oil and New York Harbor gasoline markets.
At least five of those attempts were successful, ``causing artificial prices,'' the commission said. The schemes forced prices both higher and lower, Stephen Obie, acting director of enforcement for the commission, said at a press conference today.
In two instances, on March 16 and March 19, Optiver was successful in moving the price of light sweet crude, also known as West Texas Intermediate, up 79 cents and down 49 cents, according to the commission.
Optiver was founded in 1986, and says on its Web site it's the largest derivatives trading group on the Australian Stock Exchange and the Amsterdam exchanges.
Chief Executive Named
Bastiaan van Kempen, chief executive officer of Optiver, is one of the employees named in the complaint filed today by the commission in the U.S. District for the Southern District of New York. The commission alleges van Kempen concealed the manipulation and made false statements to Nymex.
The other employees, who were in charge of trading at Optiver, were recorded on a phone call ``acknowledging that their manipulative scheme was `a fun game' and contemplating whether or not they could expand it to other markets, including `soft' commodities such as sugar, wheat or corn,'' the commission said in the complaint.
A spokesman for Optiver was not immediately available for comment, according to a woman answering phones in the company's Chicago office.
`Substantial' Fines
The company and its employees face ``substantial'' fines if the charges are proven, Obie said. He declined to say whether any criminal charges would be filed.
Senate Republican Leader Mitch McConnell of Kentucky praised the commission's action.
``As the Senate considers energy-related proposals, we must take great care to ensure that any speculation proposals not have the effect of driving trades to overseas markets -- and away from the oversight of the CFTC -- as the proposal now before the Senate would do,'' McConnell said in a statement.
The Senate may vote tomorrow on its anti-speculation legislation, and the House Agriculture Committee is meeting today on changes it wants to make to the commission's underlying authority. Obie denied that the timing of the announcement was politically motivated.
Speculation Concern
``The notion that financial players can alter one of the bulwarks of global crude pricing may play into overwrought concerns that speculation can contribute to price inflation,'' said Book.
Since December 2002, the commission, before today, had filed 41 enforcement actions charging a total of 66 defendants with energy market violations. Civil penalties to settle the actions have totaled almost $500 million, the CFTC said earlier in a statement.
BP Plc last October agreed to pay $303 million, the agency's largest-ever settlement, to resolve the commission's claims it manipulated the U.S. propane market.