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Inquiry Stokes Unease Over Trading Firms That Shape Markets
Key Excerpts from Article on Website of New York Times
Posted: May 24th, 2010
http://www.nytimes.com/2009/09/04/business/global/04optiver....
Its superfast, supersecret oil trading software was called the Hammer. And if the Commodity Futures Trading Commission is right, the name fit well with an intricate scheme that allowed commodity traders in Chicago working for Optiver, a little-known company based in Amsterdam, to put their orders first in line and subtly manipulate the price of oil to the companys advantage. Transcripts and taped conversations of actions that took place in 2007 ... reveal the secretive workings of high-frequency trading, a fast-growing Wall Street business. Critics say this high-speed form of computerized trading, which is used in a wide range of financial markets, enables its practitioners to profit at other investors expense. Traders in the Chicago office of Optiver openly talked among themselves of whacking and bullying up the price of oil. But when called to account by officials of the New York Mercantile Exchange, they described their actions as just providing liquidity. In July 2008, the commission charged Optiver with manipulating the price of oil; negotiations over a settlement continue. The Securities and Exchange Commission has opened up an investigation into high-speed-trading practices, in particular the ability of some of the most powerful computers to jump to the head of the trading queue and in a fraction of a millisecond capture the evanescent trading spread before the rest of the market does.
Note: This and other reports likely show only the tip of the iceberg of how prices of key stocks and commodities are manipulated. For a great collection of reports from major media sources on the schemes and tricks used by financial corporations, click here.
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