From the September 01, 2010 issue of Futures Magazine • Subscribe!

NYSE sees manipulation in cocoa markets

imageNYSE Liffe saw its largest cocoa trade in 14 years this July, sending chocolate producers scrambling. Anthony Ward, the hedge fund manager for Armajaro Asset Management LLP, purchased and took delivery of 240,100 tons of July cocoa contracts in a trade valued at over £658 million.

This amount was equal to 7% of the world’s cocoa supply, enough to fill five Titanic sized ships and enough cocoa to make 5.3 billion chocolate bars. Following the trade, there were only 6,710 tons of cocoa available for purchase left on Liffe, pushing prices to a high of £2,732 ($4,388) a metric ton. It was later shown the trade was not purely speculative, though, as nearly half the cocoa was subsequently delivered to Swiss chocolate maker Barry Callebaut.

"Speculation is there," Shawn Hackett, president of Hackett Financial Advisors, says. "You want speculators. They are part of the market and they are part of the liquidity factor, but you don’t want them to become so large that they become manipulative and overrun supply and demand fundamentals."

Nonetheless, the trade earned Ward the nickname "ChocFinger" from the British press, linking him to the James Bond villain Goldfinger and painting him as the ultimate coldblooded speculator.

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