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US futures commission sues trading fund over alleged gas price manipulation

[JURIST] The US Commodity Futures Trading Commission (CFTC) [official website] filed a lawsuit [text, PDF; press release and materials] Thursday against international trading fund Optiver Holding BV [corporate website] and some of its subsidiaries and employees, alleging that the company manipulated the futures prices of oil and gasoline in violation of the Commodity Exchange Act [7 USC s. 1 text]. The suit, filed in the US District Court for the Southern District of New York, alleges that for 11 days in March 2007, Optiver and some of its officials bought large numbers of futures contracts in certain oil and gasoline markets on the New York Mercantile Exchange (NYMEX) [official website], with the so-called TAS purchases requiring an initial agreement to pay either more or less than the closing bell price. Optiver and its agents would then trade the futures immediately before closing in the opposite direction they had agreed to earlier that day, and by doing so allegedly earned about $1 million. The complaint notes:

Optiver's strategy was to execute approximately 20-30 [percent] of its futures contract trades just before the Close and the remainder during the Close. Having accumulated a large net TAS position during the trading day, Defendants intended to - and on several occasions did - implement this strategy to trade a large number of futures contracts in the opposite direction just prior to and during the Close, thereby exercising their market power to improperly influence and affect the price of futures contracts in a desired direction.
CFTC has requested an injunction preventing the company and its associates from violating related US law, and wants the court to prohibit them from trading or otherwise working with commodity interests. The agency seeks monetary penalties of either $130,000 from each defendant or triple the amount gained by the scheme, whichever is greater. The New York Times has more.

On Friday, the US Senate rejected a bill [S. 3268 text, PDF; materials] designed to amend the Commodity Exchange Act to prevent unchecked energy speculation. The House of Representatives is scheduled to consider its own proposed legislation [text, PDF] to amend the Act next week. If passed, it would increase transparency in and oversight of the energy markets. Reuters has more.

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