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April 24, 2012
Brattle Senior Consultant Shaun Ledgerwood Quoted in Platts Article on Oil and Gas Market Manipulation

Brattle senior consultant and former FERC economist, Dr. Shaun Ledgerwood, has been quoted in a Platts article discussing a recent U.S. Commodity Futures Trading Commission (CFTC) settlement with Optiver, a high-frequency trading firm.

The article, “Sources at odds on impact of US CFTC's NYMEX manipulation settlement,” discusses a $14 million settlement with Optiver over oil and gasoline futures manipulation in early 2007. The CFTC said that traders at Optiver engaged in a scheme in which they accumulated large positions in “Trading at Settlement” contracts and then offset those positions by trading futures contracts shortly before and during the closing period for those same contracts, a scheme known as "banging" or "marking" the close. The settlement requires Optiver to pay a $13 million civil penalty and disgorge $1 million in profits that the CFTC claims were made under the trading scheme.

According to the article, the decision started "public clamor" about whether the settlement represents a more aggressive push by the CFTC to pursue more manipulation cases or whether it is a one-time case that will largely be ignored by the market. Dr. Ledgerwood opines that the CFTC, along with the Federal Energy Regulatory Commission, was already in the process of expanding their efforts to root out manipulation in crude oil markets and that this decision is an indicator of that push. "I think it's a sign that the CFTC is going to be much more interested in pursuing market manipulation cases,” said Dr. Ledgerwood.