Just two months ago DRW Trading sued the CFTC – in order to avoid being charged with rigging a certain future market. A technical story of different margin / collateral treatment of OTC derivatives versus listed futures in the fixed income world. Not really my cup of tea, but here are more details and background documentation.
Watchdog not scared
Either way, Donald R Wilson (DRW) failed in scaring off the watchdog CFTC. Today they charge him and his company with banging the close in this future market. And pocketing $20m. Well, “marking” the close would be a better term, because nobody ever traded against them in the close.
The market prices did not reach the level that DRW had hoped for and expected. Rather than accept that reality, DRW allegedly executed a manipulative strategy to move the market price in their favor by “banging the close,” which entailed placing numerous bids on many trading days almost entirely within the settlement window, none of which resulted in actual transactions as DRW regularly cancelled the bids.
“DRW couldn’t accept reality”
According to the CFTC mister Wilson and his firm couldn’t accept the reality of the market prices. Not a line I would expect from an agency such as the CFTC, a nasty thing to say to trader. Full official CFTC charge here, a short but good read. An alternative good read is Bloomberg’s Matt Levine :