‘Rogue trader’ probe after oil hike

Author: By Russell Lynch and Paula Fentiman, Press Association

Exchange ICE Futures Europe – where bets on the price of oil can be placed
months ahead using futures contracts – is probing the flurry of trading in
the early hours of Tuesday morning.

Oil broker PVM Oil Associates was forced to unwind the series of unauthorised
trades.

The trades pushed the price of Brent crude futures up by more than two dollars
to its highest level this year above 73 dollars a barrel.

ICE Futures Europe’s president and chief operating officer David Peniket
refused to comment on individual cases, but said the body would investigate
unusual trading activity as a “matter of course”.

“There are a range of procedures that are followed to look at trading
patterns, price movement and levels of activity.

“We have a market supervision system and a compliance system and we are
constantly carrying out the kind of process that we have discussed.

“It will investigate and follow up, and where appropriate, action will be
taken,” he said.

London-based PVM Oil Futures issued a statement after rumours spread about
irregular trading on City and Asian markets.

In a statement issued by managing director Robin Bieber, the firm said it was
investigating the unauthorised trades but did not name any employee
suspected of being involved.

The statement said: “PVM can confirm that it was the victim of unauthorised
trading on Tuesday 30th June.

“As a result of a series of unauthorised trades, substantial volumes of
futures contracts were held by PVM.

“When this was discovered, the positions were closed in an orderly fashion.

“PVM suffered a loss totalling a little under 10 million dollars.

“PVM expects the highest standards of conduct from its people and takes
contraventions of those standards extremely seriously.”

Traders can use ICE Futures Europe, part of the Intercontinental Exchange, to
buy or sell crude oil for delivery in several months’ time, effectively
betting on whether prices will go up or down.

During the early hours of Tuesday morning, futures contracts for 16 million
barrels of oil reportedly changed hands in one hour, compared with a typical
volume of 500,000 barrels.

Mr Peniket said the exchange had a “close relationship” with the Financial
Services Authority (FSA) although the watchdog could not confirm or deny if
it was investigating.

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