Big Fine in Metals Case; Hedge-Fund Trader to Pay $1 Million in Market-Manipulation Settlement
The former head trader at a hedge-fund giant settled regulatory allegations that he systematically attempted to manipulate prices of platinum and palladium, a sign that commodities regulators are intensifying efforts to crack down on manipulation in the futures markets.</br></br>Christopher Pia--former head trader at hedge fund Moore Capital and a major player at the fund for 18 years--agreed to pay $1 million to settle civil allegations by the Commodity Futures Trading Commission, the regulator said in a release Monday. The CFTC alleged that he tried to artificially move futures prices near the very end of daily trading in a maneuver called "banging the close," which involves inundating the market with trading orders. The $1 million penalty is one of the largest ever levied by the CFTC against an individual.</br></br>The settlement comes amid a boom in which the prices of metals and other commodities have skyrocketed, raising concerns at the CFTC about possible manipulation and abusive practices. One way investors bet on commodities is through the futures market, where they enter into contracts to buy or sell raw materials at a set price on a specified date. The CFTC now has a broader mandate and new tools to attack violations in the commodities markets.</br></br>Under the CFTC settlement, the 45-year-old Mr. Pia, once one of the most powerful traders on Wall Street, also agreed to a permanent ban in trading CFTC-regulated products in platinum and palladium, such as futures contracts. He also is banned from trading instruments regulated by the CFTC during the closing period, the final few minutes of trading when settlement prices are determined. Mr. Pia hasn't traded in the contracts involved in the settlement since May 2008, according to a person close to the situation.</br></br>A lawyer for Mr. Pia declined to comment. A spokesman for Mr. Pia said Mr. Pia "is pleased to have settled with the CFTC in order to put this matter behind him. Pia Capital, his current firm, is committed to abiding by the CFTC Order and to maintaining the highest level of compliance." He settled without admitting or denying wrongdoing.