In the midst of accusations from some in Congress that it has not been diligently monitoring energy markets, the CFTC on July 24 filed a case against Netherlands-based Optiver Holding BV, two of its subsidiaries and three employees. The defendants are charged with 19 counts of attempted manipulation of Light Sweet Crude Oil, New York Harbor Heating Oil and New York Harbor Gasoline futures contracts on the Nymex during March 2007. At least five of the attempts were successful, allegedly profiting the defendants about $1 million.
The complaint names Optiver, Chicago-based Optiver US LLC and Dutch company Optiver VOF along with Optiver head trader Christopher Dowson, supervisor Randal Meijer and CEO Bastiaan van Kempen. They are accused of using a technique known as “banging the close” to manipulate prices.
In this scheme, a large position is obtained prior to the closing period and then offset just before the close, causing artificial prices. The technique can be used to force the price either up or down. Of the five successful attempts by Optiver, three moved the price lower and two moved the price higher. Optiver is not commenting on the case.
This action by the CFTC comes at a time of heavy pressure from Congress to control energy speculation. The question of whether the case was politically motivated or timed came up at the July 24 press conference.
“I categorically deny [political motivation],” said Stephen Jay Obie, CFTC acting enforcement director. “As you can see this case is ready… We as the Division of Enforcement pursue all manipulators.”
Perhaps Congress should be wary.