On March 14, the CFTC announced that it was charging former MF Global broker Joseph F. Welsh III with attempted manipulation of palladium and platinum futures contracts prices traded on the New York Mercantile Exchange. According to the complaint, Welsh engaged in price manipulation on at least 12 different occasions, from June 2006 through May 2008.
According to the complaint, Welsh attempted to manipulate the market through a tactic called “banging the close.” Welsh received market-on-close orders to buy palladium and platinum futures contracts from Christopher Pia, a former portfolio manager of Moore Capital Management, LLC. As Welsh knew that Pia wanted to buy at high prices, Welsh devised and used a trading strategy that maximized the price impact by trading during two-minute closing periods of the palladium and platinum futures contracts market, according to the CFTC complaint.
Welsh also routinely withheld entering the market-on-close buy orders until only a few seconds remained in the Closing Periods, executing the orders within seconds of trading’s close.
The CFTC seeks civil monetary penalties, trading and registration bans, and an injunction against further violations of the federal commodities law. Last year, the Commission ordered a filing and settling against Pia, and has also settled actions against Moore Capital Management LLC’s successor.
Read more about the enforcement action.
Photo credit: Chilli media