Optiver Holding BV, a Dutch high-frequency trading firm, has set aside $19.3 million to settle with the CFTC, according to a report leaked to Reuters. Optiver and the CFTC have been locked in legal combat for years over allegations that the firm manipulated crude oil prices to the tune of $1 million in 2007.
The case, opened three years ago, has finished a second round of mediation sessions in New York this week, and the multi-million dollar sum set aside implies the two sides may at last have struck a deal. In its report, Optiver said that the firm had “provided for possible fines, claims and legal expenses related to the civil action, investigation and class action.” It was adopted by shareholders in a private meeting at the end of June, near the time the company was firm rumored to be considering a settlement. $19.3 million is much larger than the initial $10 million sought by the CFTC, but most likely provides for expenses accumulated by the agency in the meantime.
A final settlement will have legal consequences both for Optiver and the CFTC. There are several class-action lawsuits pending against the trading firm, and the U. S. Department of Justices is conducting its own investigation. A large settlement here increases the likelihood of more payouts later on. For the CFTC, this may bode well for future oil-manipulation cases, including its $50 million suit against Arcadia Petroleum and associates.
A settlement will also be a strike against high-frequency trading. HFTs have been the subject of heated regulatory discourse this summer, but a positive study showing the stabilizing effects of HFTs rehabilitated their image last week. A high-profile example of HFTs abusing the market may turn back the clock on public opinion.