Commodity Futures Trading Commission….say it now Commodity Futures Trading Commission …..oh yah now the CFTC is going to be hot on TV. God Bless Steve Hargreaves. I am a thief.. but I am not going to list his entire post or even claim it as my own. But I have been bitching about the speculators in oil since last September so I think I get to thump my chest a little. I even rented the Movie Trading places so I can get into the spirit of the thing. So let’s recronical the events. In August the Fed announces that they are more worried about stability in the housing market, refuses to back the dollar with interest rate increases and the dollar plunges. All of the currency speculators dumped their dollars (many of whom are also the oil speculators today – hint hint) and the price of oil climbs to 50$$s a barrel. The Saudies and OPEC see the rise as good for them and constrict production slightly. The price climbs to 60$$s a barrel and the speculators say hmmm. There is a commodity we can abuse so they buy long in the futures market, take that oil out of the market and the price begins to soar. WHY? Because these are people who have never been in the oil market. They are not going to touch a single barrel of oil and the oil guys do not know these people. So the speculators keep buying and the price keys rising which should have ended at about 100$$ a barrel. At that point every financial planner for every rich person said, “get into oil” like it was gold or something. As they did the oil soared again to somewhere around 130$$ per barrel. The gasoline refiners realized they could jack the price of gasoline under the guise of expensive oil even though that’s not the price they were paying.
The Saudies got pissed off because they know at some point people will quit using gasoline and they know most that quit using gasoline will not come back ultimately destroying their market. This is when it gets good because this is when the chisslers and the real crooks get in. They start selling their futures to each other at inflated prices, and the people busted today start hammering the market at the open and the close and the market hyperinflates to high water marks for now at 148/149$$$ a barrel. Damn you would think these people would at least have the decency to hit 150$$ but nooooo. That is because the Senate announced that they were holding hearings on speculation and the Bushman order the CFTC to investigate. OH OO. So the speculators start to sell off but they have to doooo itttt slowlllly or the oil market crashes and the whole world starts looking for them to kill them!
So what will happen now? Well alot of minor chisselers and crooks will go to jail. The real players at the hedge funds will be nearly out of oil by the end of August and prices will slowllllly come down until the refiners have to drop prices and start up capacity that they have not been using lately.
Now, who is responsible for all of this? Well Phil Gramm and his Wife Wendy actually (yes the guy who said we were whiners) They effectively changed the rules for commodity trading at the end of Bill Clinton’s term and people just sort of played with it in 2000 to 2003 BECAUSE there was more money to be made, and more fun too, in the housing market. Yah those Wall Street guys are real wacky when it comes to stealing other people’s money.
Traders manipulated oil prices – U.S.
Regulators claim firm attempted to ‘bang the close’ by amassing large positions
just before markets closed.
NEW YORK (CNNMoney.com) — The government charged an oil trading firm Thursday with manipulating oil prices in the first complaint to be announced since the regulators began a new investigation into wrongdoings in the energy markets.
The Commodity Futures Trading Commission accused Optiver Holding, two of its subsidiaries and three employees with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures on the New York Mercantile Exchange.
“Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets,” CFTC Acting Chairman Walt Lukken said at a press conference. “These charges go to the heart of the CFTC’s core mission of detecting and rooting out illegal manipulation of the markets.”
In May, under the backdrop of record oil prices and calls from legislators to crack down on speculative oil trading and market manipulation, the CFTC announced a wide-ranging probe into oil price manipulation. The agency says it has dozens of investigations ongoing.
The complaint filed Thursday names Bastiaan van Kempen, chief executive; Christopher Dowson, a head trader; and Randal Meijer, head of trading at an Optiver subsidiary.
The CFTC said the firm attempted to “bang the close” by amassing large positions just before markets closed – forcing prices up – then selling them quickly to drive prices down and pocketing the difference.
The alleged manipulation was attempted 19 times on 11 days in March 2007, the agency said. In at least five of those 19 times, traders succeeded in driving prices higher twice and lower three times, according to the CFTC.
Optiver issued a written statement saying the firm had received the complaint.
“We take the Commission’s action very seriously, and are treating it with utmost attention and care,” said the statement. “Obviously, we cannot comment further until we have had the opportunity to review the complaint.”
CFTC stressed that the price changes were small and the manipulation was isolated, and that the investigation has nothing to do with the recent heat the agency has taken on Capitol Hill over rising oil prices.
Here is more from the CFTC itself:
CFTC Charges Optiver
Subsidiaries, and High
Manipulation of NYMEX
and Gasoline Futures
Defendant Caught on Tape and in
Email Saying He Would “Bully”
The CFTC filed the civil enforcement action in the United States District Court for the Southern District of New York against Optiver Holding BV, a global proprietary trading fund headquartered in the Netherlands, and two subsidiaries – Optiver US, LLC (Optiver), a Chicago-based corporation, and Optiver VOF, a Dutch company. The complaint also names defendants Christopher Dowson (head trader of Optiver), Randal Meijer (head of trading and supervisor of Optiver and Optiver VOF) and Bastiaan van Kempen (Chief Executive Officer of Optiver).
The Energy Futures Contracts Manipulated by Defendants
The defendants’ manipulative trading scheme involved three futures contracts listed for trading on the NYMEX: the Light Sweet Crude Oil futures contract (Crude Oil, also referred to as West Texas Intermediate (WTI)), the New York Harbor Heating Oil futures contract (Heating Oil), and the New York Harbor Reformulated Gasoline Blendstock futures contract (New York Harbor Gasoline). The settlement price for the Crude Oil, New York Gasoline, and Heating Oil futures contracts is derived by calculating the volume weighted average prices of futures trades conducted during the closing period for the contracts (from 2:28 to 2:30 p.m.). The volume weighted average price is referred to commonly as the VWAP.
The defendants’ manipulative scheme involved the Trading at Settlement (or TAS) contracts in Crude Oil, Heating Oil, and New York Harbor Gasoline contracts. TAS contracts are futures contracts, except that the parties determine at the initiation of the contract that the price of the TAS contract will be the day’s settlement price plus or minus an agreed differential. A TAS contract which has been bought or sold can be offset by trading a futures contract in the opposite direction.
The Manipulative Scheme
The manipulative scheme, in defendant Dowson’s words, to “bully the market,” involved trading a significant volume of futures contracts in Crude Oil, Heating Oil, and New York Harbor Gasoline in the opposite direction of the associated TAS position, before and during the close of the contracts. The defendants’ goal in trading the large volume of futures was to improperly influence and affect the price of futures contracts in Crude Oil, Heating Oil, and New York Harbor Gasoline. The defendants’ manipulative scheme was, in the words of defendant Meijer, “built on the idea that we can control the VWAP.”
As alleged in the complaint, the scheme ultimately permitted defendants to profit regardless of the direction of the market move, provided that Optiver’s futures trading in the close and before the close was in the opposite direction of the TAS position it had accumulated during the trading day.
All of this is hysterical because they just said that the reason for the rise in the price of oil was SUPPLY AND DEMAND 2 days ago. Dare I say it? Thats Rich.