First Oil Manipulation Charges Set

I

Ivanovich

I've gotta laugh here. Is the CFTC just going to find a bunch of scapegoats in this process?

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CFTC Reports Oil Market Manipulation Charges
Thursday, July 24, 2008 11:18:00 AM

San Francisco, July 24: AUD/USD continues to pivot around 0.9600 and trades at 0.9599 as the CRB extends lows to 411.32, and the lowest levels since April. The fresh low comes in the wake of the news from the CFTC that it has made its first charges on crude, gasoline and heating oil market manipulation against privately held company Optiver. It has not disclosed other findings but opens the door for further cases in the weeks ahead. This news is adding to the pressure on commodities.
 
I couldn't really get my head around exactly what they were doing, but it sounds like something akin to a card counter finding a legitimate way to beat the casinos. They used their intelligence to beat the system and they are penalyzed for it.

...unless they broke some specific exchange rule. I'm interested to see how this pans out.
 
I can't figure out what Optiver did that was wrong. I recall reading that Optiver bought futures contracts then sold. I can not tell if they were day trades or short term position trades. I do not see the manipulation here.
 
It is a minor manipulation at best. Even still, I think they were manipulating it down more than up. I agree with an earlier poster that this is the CFTC basically saying screw you to Congress who is trying to pin the blame on speculators.
 
If I understand correctly Optiver participated in an OTC derivatives market where contracts are traded of which value is based on the day's settlement price (here refered to as TAS, never heard that term before). Apparently they found a way to profit consistently from those contracts by buying and selling the underlying futures towards the close.

I don't see why this would be illegal as they are not selling to themselves or placing buy orders on futures they already own. The TAS contracts are excercised after closing settlement, while all their activity in the underlying futures occurs before closing settlement. Technically this is not an illegal form of marking the close and this whole affair was likely created by a group of regulator bobos catering to congressmen complaining about high oil prices.
 
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