Reuters: Regulatory News: UPDATE 2-High-frequency trader Optiver pays $14 mln over oil manipulation

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UPDATE 2-High-frequency trader Optiver pays $14 mln over oil manipulation Apr 20th 2012, 00:29 Thu Apr 19, 2012 8:29pm EDT * Dutch firm accused of manipulating oil prices * CFTC case one of largest involving oil price manipulation * No admission of wrongdoing in settlement approved Thursday By David Sheppard and Jonathan Stempel April 19 (Reuters) - U.S. regulators obtained their first major fine from a high-frequency trading firm over oil market manipulation on Thursday after a federal court ordered Optiver Holding BV to pay $14 million over trades dating back five years. In a ruling that came just two days after U.S. President Barack Obama proposed a renewed crackdown on oil market manipulation, the Amsterdam-based company agreed to pay a $13 million civil penalty and a $1 million disgorgement of profits over allegations it used a rapid-fire tool nicknamed "The Hammer" to influence U.S. oil prices in March 2007. The case by the Commodity Futures Trading Commission (CFTC), filed in July 2008, alleged that traders in Optiver's Chicago office reaped a $1 million profit by engaging in a practice called "banging the close" in which a firm attempts to affect prices by executing a large volume of deals during the final moments of the trading sessions. "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." In agreeing to the settlement, Optiver neither admitted nor denied the CFTC's allegations. "Those who seek to manipulate oil or other commodity markets should know we aren't messing around," said CFTC Commissioner Bart Chilton. "You manipulate, we are going after you." The firm, founded in 1986, says on its website it has "never had a loss-making year". The case revealed emails and phone recordings showing efforts by traders at Optiver's Chicago branch to "move," "whack" and "bully" oil prices. The settlement bars traders Christopher Dowson, Randal Meijer and Bastiaan van Kempen from trading commodities for eight years, four years and two years, respectively. The order also limits the company from trading U.S. oil futures in the three minutes prior to the market close for the next two years. High-frequency trading has come under scrutiny in commodity markets in recent years following a series of violent and seemingly inexplicable price moves that many traders have blamed on its growth. Optiver, little known outside the close knit HFT communities of Amsterdam and Chicago, has more than 600 employees worldwide, including offices in Sydney. Calls to the offices in Chicago and Amsterdam went unanswered. An employee at the Sydney office said the company was expected to release a statement shortly, but could not confirm when. The CFTC is expected to review HFT trading, which has come in for fierce criticism since the equity market "flash crash" in May 2010. The settlement was approved on Thursday by Chief Judge Loretta Preska of the U.S. District Court in Manhattan. The case is CFTC v. Optiver US LLC et al, U.S. District court, Southern District of New York, No. 08-06560. Link this Share this Digg this Email Reprints

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