Investors were scratching their heads Thursday after learning that authorities may have uncovered wrong-doing in the oil market. Specifically the Commodity Futures Trading Commission charged global trading fund Optiver Holding with manipulating the NYMEX oil market in March 2007.
The complaint charged that three employees of the Netherlands-based fund made about $1 million through manipulation of crude oil, gasoline and heating oil futures on the Nymex. On a relative basis it’s a small case.
According to the complaint, the employees carried out a manipulative scheme known as "banging" or "marking"' the close. "Banging the close" refers to the practice of acquiring a substantial position leading up to the closing period, followed by offsetting the position before the end of trading for the purpose of attempting to manipulate prices.
The agency said the employees in three instances forced futures prices lower and in two instances caused prices to rise.
"Although this alleged energy trading scheme lasted only several days in March 2007, even short-term distortions of prices will not be tolerated by the commission," said CFTC Acting Chairman Walt Lukken.
As Wall Street grapples to understand happened, everyone has Enron in the back of their heads. Is there larger manipulation going on?
“There’s no evidence that we’ve seen”, says Nymex CEO Jim Newsome on Fast Money. “Nymex is a very transparent marketplace. We’ll continue to monitor it but right now there’s no signs of manipulation.”