[Mithra]

The agency that regulates commodity trading yesterday charged a Dutch firm, Optiver Holding, and its U.S. subsidiary with manipulating the price of crude oil, heating oil and gasoline, marking the first case to arise from the body's investigation into the energy markets.

In its complaint, which was filed in U.S. District Court for the Southern District of New York, the Commodity Futures Trading Commission accused three employees of engaging in illegal trades called "banging the close." The phrase refers to the practice of buying or selling large volumes of commodity contracts in the closing moments of a trading day. The movement in prices then benefits the traders' other holdings.

CFTC officials said Optiver traders used this scheme over 11 days in March 2007 to influence the price of several benchmark energy commodities, including West Texas Intermediate crude oil and New York Harbor heating oil.

In five instances, the traders were successful in moving the price up or down to benefit their investment bets, the CFTC officials said. The complaint alleges that the traders pocketed $1 million through the scheme.

Steven Schwab, a spokesman for Optiver, did not return calls seeking comment. On its Web site, Optiver identifies itself as a 22-year-old company and a large derivatives trader with offices in Amsterdam, Sydney and Chicago.

Under pressure from lawmakers to keep a tighter rein on commodity trading, the CFTC unveiled the charges a day before the Senate was set to vote on legislation aimed at curbing excessive speculation.

"The CFTC has every incentive to show that the cop is on the beat and is doing his job," said Kevin Book, senior vice president for Friedman, Billings, Ramsey Group, an Arlington investment firm. "No regulator likes the direct scrutiny of Congress or the threat of sweeping new obligations or worse yet, the loss of regulatory authority."

Walter Lukken, acting chairman the CFTC, said the agency was not trying to influence the Senate vote. "As you can see, this case was ready. This was not a politically motivated case," Lukken said during a news conference.

The agency is investigating "dozens" of energy-manipulation cases and will announce each one when the probes uncover evidence of illicit behavior, Lukken added.

The CFTC has intensified its scrutiny of energy markets as the price of a gallon of gasoline soared above $4 and as crude oil reached a record $147 a barrel earlier this month. The price of oil has since fallen, settling above $125 yesterday.

Earlier this year, the commission took what it described as the "extraordinary step" of announcing its nationwide probe into illicit trading in energy markets.

Why is this illegal?

[viruswitshoes]

because it artificially inflates the price of oil which has major reprocussions on the consumer.

its not like a stereo where we can choose to buy one or not. some people, due largely to the transportation system in america, use cars as their only source of transportation. therefore, they need the oil and have to bend to the will of the market.

inflating the price to levels that are not based on the actual market demands cause a lot of people to suffer. its like charging large amounts of money for water.

[Gotti McCarran]

Originally Posted by Mithra

Why is this illegal?

Wow they pocketed 1 million with the same scheme that ALL MAJOR PLAYERS USE TO POCKET BILLIONS. It's basically legal Mithra, if you can afford to buy politicians. This company was just trying to get a piece of the pie and since they can't trial GS, they send these poor fellows to prison. The Enron executives are all still walking around besides of the one dude they hung lol.

It also has the nice side effect of making a 1 million dollar deal look like a huge thing when in reality this type of thing goes on the Brent Crude Oil at least every Thursday when they come out with the new reserve numbers, especially on options expirations day and believe me when I tell you this usually folks make that million look like peanuts. Oh my god we expected a drop of 1.5 million barrels and instead it only dropped 1.3 million barrels, brent crude goes down 4 bucks until the end of the day at the end of a major downward correction when all the little guys were back in long already. I'd like to know who is in those tanks counting the barrels sometimes.....