Amaranth Natural Gas Manipulation

The civil complaint filed by CFTC against Amaranth has a fascinating description of how Amaranth allegedly manipulated the settlement price of natural gas futures. The most interesting part is Exhibit C which contains the letter that Amaranth wrote to the exchange explaining its unusual trading in the final minutes of trading on expiry day. It tells a story of Amaranth trying to reduce its calendar spread position by first reducing the far month position and then reducing the near month position by the same amount. Amaranth argued that the near (expiring) month trades took place in the last few minutes because that was when the extent of reduction in the far month position became clear.

The CFTC complaint contains a whole set of instant messages (IM) exchanged by Amaranth’s traders about the manipulation that they were attempting. What is interesting about many of these instant messages is that they also show the IM Administrator sending messages to all participants stating “Note: This session is recorded and this recording is the sole property of Amaranth”. This does not appear to have deterred the traders from talking of their manipulation quite explicitly.

Posted at 9:56 pm IST on Thu, 26 Jul 2007         permanent link

Comments