Friday, July 25, 2008

Optiver Holdings Manipulating Oil Prices

In an earlier posting Speculators May Face Prison 6/5/08 I stated "
It is rumored the Commission (Commodity Futures Trading Commission, CFTC) has or is ready to ask the Department of Justice to join in the Commission's investigation."

While the Department of Justice will make no comment it leaves you to wonder if they are in fact investigating Optiver Holdings and its two subsidiaries for fraud. The CFTC has accused Optiver Holdings of illegal price manipulation in the oil futures commodity market and asked for a heavy fine. The main headquarters for Optiver Holdings is listed as being based in Amsterdam, but three of the main people involved are Chicago residents with firms in Chicago and Amsterdam. According to the article in the Chicago Tribune they are
Chief Executive Bastiaan van Kempen of Chicago; Christopher Dowson of Chicago, a head trader; and Randal Meijer of Chicago.

During the time Optiver was allegedly manipulating the price of oil, the Securities and Exchange Commission was considering an amendment to control price manipulation. Along with a long list of other investors Chief Executive Bastiaan van Kempen sent a letter to the Commission objecting to the amendment.

Now it is clear why Mr. van Kempenn objected to the amendment. One wonders if this is only the tip of the iceberg.

At one point today the price of oil hit a low of $121 per barrel, even at a time when CNN is constantly airing the "disastrous oil spill in the Mississippi ", its really diesel and will be cleaned up shortly but CNN has their own agenda. Just imagine how far the price would fall if Pelosi and Reid would allow a vote on the Republican Bill to do everything mentioned in the Bill including, Domestic Drilling, Alternative Energy Investing, Research For New Technology and yes more Commodity Market Transparency.

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  1. I can't support your apparent desire to grant more power to a US government bureaucracy to meddle in the market. If they can prove manipulation, fine, let them do it. Until then this company and all others deserve our supposition of innocence. And this bureaucracy certainly doesn't need the extra 100 employees and addition meddling ability that Congress is considering giving it.

    You know I usually agree with what you have to say, but this is one area I can't. I've discussed the important role of futures speculation here and here.

  2. I have no desire to grant more power to a government bureaucracy. I am saying the same thing most Republicans are saying, do it all and do it now. Adding more people to CFTC to look for any wrong doing is not meddling in the market. If there is something wrong or illegal going on that results in everyday consumers suffering, then do your job and prosecute the people that are breaking the current laws. I have said nothing about adding new laws or over regulating the market. If the Democrats would allow Republican amendments that support drilling you would see both parties support it and the price of oil would drop to a more realistic price, resulting in lower prices at the pump. Since the President dropped the Executive Moratorium and Congress started serious discussion about oil prices, the price of oil has dropped dramatically. In my state we have not reduced the amount of gas we use as compared to the national average, yet the price at the pump has fallen in some areas as much as 30 cents per gallon. This should not be a partisan issue. Open up drilling, shale oil, and enforcing transparency in the market. I have not convicted this company, CFTC has by asking for them to be fined. If they have done something illegal that has brought harm to the American consumer then they should be investigated and prosecuted.

  3. The latest bill I saw, that was defeated by Republicans in a party-line vote, would have done the following:

    *CFTC must publish reports that provide the number of positions and total value of index funds, and other passive, long-only and short-only investors in energy and agriculture markets;

    *Conditions will be set for granting hedge exemptions from position limits, mostly for commercial purposes;

    *Authorizes 100 new CFTC employees to monitor markets;

    *CFTC will report on impact on over-the-counter markets from position limits on exchanges;

    *Reporting will become mandatory for over-the-counter trading of look-alike agricultural and energy contracts.

    That is a massive increase in the bureaucracy that is the CFTC, and a huge strike against individual economic freedom. It would also increase the cost of traders doing business.

    When one party is almost always ass-backwards in its 'solutions,' every issue is a partisan issue.

  4. If Democrats would allow debates they could work out reasonable oversight, right now the market is basically unregulated. This went too far and without debating the drilling and shale issue I was glad it went down. Now I'm watching to see how the market reacts, Monday.