This page has been archived and commenting is disabled.
Ex-Moore Trader Chris Pia Identified As "Close Banger" Of Platinum And Palladium, And Other Things
As frequent readers will recall, in late April we pointed out that a Moore Capital ploy to "bang the close", which is merely a trading artifice in which the closing price is manipulated by repeated barrages of buy or sell orders to get a closing print that causes a derivative instrument to be in (or out of) the money, resulted in a then near-record fine charged by the SEC to go alongside a settlement of manipulation allegations. We then observed: "As the saying goes, if you look around the table, and you can't figure
out who is using illegal manipulative mechanisms to push the market
higher or lower, you are an idiot: the answer is all of them." Well, we know the manipulator is Moore, but not who the specific trader was. Today, via the WSJ, we learn that the guilty person is none other than former Moore trader, and recent sole hedge fund manager, Chris Pia, who also happens to be Louis Bacon's right hand man for 18 years running. We also learn that platinum are palladium were merely two of the numerous products that Chris was banging (into the close). And the coolest thing: Mr. Pia is now running his own hedge fund Pia Capital Management, as if nothing happened (although the anchor Swiss gold-refining investors in Pia Capital may soon have to reevaluate their relationship with the PM (no pun intended) at this point). One also wonders if these were the accepted illegal trading practices at Moore (for which they got caught) just what else is the $10 billion hedge fund guilty of doing on a daily basis to attain that ever more elusive alpha (the 7x return that Pia generated in 8 years at Moore sure wasn't from holding T-Bills).
From the WSJ, we learn that Pia is a perfectly normal, calm, collected, orthodox person, just like most other happily married, responsible, hedge fund managers:
Mr. Pia liked to tell colleagues about his modest upbringing, and that
he is a devout Catholic. He complained about hedge-fund managers he
considered elitist. On the trading floor, he often twirled a string of
rosary beads. Callers to his cellphone heard the Batman theme song.
Yet it is not his character we are interested in, but his precious metals manipulation scheme, which while applicable to platinum and palladium, is perfectly relevant to the daily gyrations, especially prior to Comex close, in gold and silver.
"As you get down the scale to commodities like palladium, futures markets are almost by definition less liquid and more susceptible to this kind of conduct," says Scott Early, a securities lawyer and former general counsel of the Chicago Board of Trade. But it becomes easier for regulators to catch such activity in thinly traded markets, he says.
Closing prices in futures markets are set differently than they are in the stock market, where they are determined by the last trade each day, at 4 p.m. In the futures market, the "settlement," or closing price, is the weighted average of all trades during the last few minutes of trading. For palladium, for example, the "closing period" is from 12:58 to 1 p.m., and for platinum, it is 1:03 to 1:05 p.m.
Traders can push settlement prices around by inundating the market with orders during the last two minutes of trading. Trying to push prices higher in that way—banging the close—is in some cases considered market manipulation under commodities laws. It is loosely akin to an illegal stock-market practice known as "pump and dump," where traders push up the price of thinly traded stocks by disseminating misleading information, then sell shares before the price falls again.
In 2008, several traders complained to the New York Mercantile Exchange about someone entering the market near the close and aggressively buying platinum and palladium futures contracts, two people familiar with the matter say. Around the same time, the CFTC began detecting unusual trading patterns in the two markets. CFTC enforcement lawyers began questioning Mr. Pia about his trading, says one of the two people.
The CFTC complaint against Moore doesn't specify the day or days on which the trades in question took place, nor does it disclose whether Mr. Pia was the trader involved.
Often, at 12:58 p.m., two minutes before the close of the palladium market, the unnamed trader—Mr. Pia, according to people familiar with the matter—or an associate would send instant messages to a trader in that market with "directions that indicated that he wanted to push prices higher," according to the CFTC complaint. That trader waited until the last 10 seconds of trading to relay the high-priced orders to a floor clerk in the trading pit of the New York Mercantile Exchange, the complaint said. Moore sometimes repeated the sequence during the closing period for platinum futures, the complaint said.
Fewer than 10 traders typically participate in the thinly traded market for palladium, the CFTC said, and the Moore trades accounted for most of the volume in the two markets during the closing period.
In a series of interviews, CFTC investigators asked Mr. Pia whether he intended to push prices higher through the trading in question, according to one person familiar with the matter. Mr. Pia denied doing anything wrong. He admitted to waiting until the last minute to place the orders, but said he simply was buying what the floor traders were selling and the market would go up, this person says. Mr. Pia said his last-minute timing was intended to thwart rival traders who often would try and buy ahead of Moore's orders, this person says.
And guess what: the CFTC is likely buying this. We are confident in this because they are actually confused by Pia's apparetn motives:
The ongoing CFTC investigation is looking into whether Mr. Pia tried to
boost his compensation through the trades in question, according to a
person familiar with the investigation. Among the questions being
examined by the CFTC is whether Mr. Pia was trading ahead of Moore's
commodities orders through a portfolio he managed within the firm,
possibly in an effort to increase his pay, this person says. Such
tactics can give traders an unfair advantage because pending
orders—which aren't known to the public—can affect prices when executed.
In other words, in addition to manipulating thin volume closes, was also allegedly frontrunning internal (presumably prop although Moore is so big it may well have been flow) trades. One would almost think Pia took a master class in market manipulation at Goldman. Oh wait:
In 2008, for example, Mr. Pia entered into a trade under which Moore would get a $25 million payout if the New Zealand dollar rose to a certain level. Goldman Sachs Group Inc. was on the hook to make the payout. If that level wasn't hit, Moore stood to lose $1 million.
As the trade's expiration date approached, the New Zealand dollar was trading about 25 cents below the price at which the contract would pay out. Mr. Pia got clearance from top Moore officials to spend billions buying New Zealand dollars, hoping the currency would hit the set price, according to the person with knowledge of the trade. Fifteen minutes before the contract expired, Mr. Pia began buying billions of New Zealand dollars, lifting the currency to the price at which Moore was able to collect the $25 million, the person says.
Gary Cohn, Goldman's president, later congratulated Mr. Pia on the trade, the person says.
Yes indeed, to Goldman such practices were not only not worth pursuing legal action against (who needs capital when you have discount window access and are, after all, the squid), but in fact, were laudable and worthy of commendation. Oh yes, and it appears that in addition to platinum and palladium, Pia was guite a close banger of the NZD, and who knows what other currencies. Perhaps the CFTC will tells us that the FX market is as thin as the palladium one, and just 10 people give or take trade carry pairs? (Actually that may be quite true right now that nobody trades any more, but it surely wasn't the case in 2008).
We don't have any bad blood with Mr. Pia: "The new fund, headquartered in Greenwich, Conn., has about $500 million under management, and is down 0.6% for the year." Since it is relatively difficult to be down (or just barely up), if performing alleged illegal market manipulative scams, we are confident he has learned his lesson. Yet for every Pia, there are 1,000 LBMAs, who perform precisely the same act on the Comex all day every day, in an attempt to constantly push down the key Central Banker nemesis: "gold." We are confident that the CFTC and the DOJ will get right on with their investigation of comparable manipulation in the gold and silver markets. Because after all, nobody has anything to hide there... And gold would still be where it was if it weren't for consistently shady PM activity in the market.
We hope Mr Pia will come forth to the media out of his own volution and discuss what else the broader public should be aware about manipulative practices, be they in the FX market, or in commodities. Alas, we are not holding our breath. Nor are we holding our breath that the DOJ, which has now be ruminating for about about 4 months as to whether or not to launch an investigation into silver market manipulation by JPM, will ever come to an affirmative conclusion. After all, they have said on so many occasions there is absolutely nothing wrong with the PM market, how can one possibly not believe them?...
»
- 18811 reads
- Printer-friendly version
- Send to friend
- advertisements -
Busted bangin', bitchez!
Has the "bitchez" meme run its course yet?
I thought we were just gettin' it going.
Mr Pia getting me pissed off Mr Lennon.
Banging the close of two of my favorite precious metals...
I sure hope these guys (HFTs, scum like Pia, etc.) get what's coming to them, and real soon.
Maybe we'll get some good news: Pia will everyone's bitch!
Since you are waisting space...
BITCHEZ
BITCHEZ
BITCHEZ
BITCHEZ
Never go full trade-tard.
not even close...
"Has the "bitchez" meme run its course yet?"
LOL...68.1 and rising...bitchez !!!
One can only hope so.
DavidC
Did you all hear that they found a dead naked guy in the hot tub of Bacon's home in the Bahamas a month ago?
http://www.businessinsider.com/mans-body-found-naked-in-louis-moore-bacons-hot-tub-2010-5
how very Caligula like
Roman baths were public.
Spell check, bitchez!
Hoo-bangin' Bitchez?
[Ice Cube]
It's the don go let'em know
Unwettable, ahh.. big fish incredible
Hoo-Bangin' on the white collars got a pile of dollars
Still rollin' Impalas
I'm bombin' on Common Sense
Chicago is mine nigga hit the fence
Hopefully, the only banging in Mr. Pia's future will be him on the receiving end from his prison cellmate.
I imagine Mr Lennon Hendrix would like to have a few words with Mr Pia.
Only a few.
So what is so special about 3am and 9am in the gold market? Those times are when it always gets hit.
that twirling rosary bead thing might be some new templar weapon - watch out
like the NWO, not so new.
what's new is the spinning mala defensive manuevers.
well, not so new either...what is new then?
Yeah, riiiiiight. You'd act confused too if otherwise you might be held liable. Let's see if they ever get unconfused about the silver and gold games at the Crimex.
But hey, it's Friday. Time for some music!
I don't want to work,
I just want to bang on the close each day.
I don't want to play,
I just want to bang on the close each day.
If I may...
High Low, High Low it's off to work we go
High Low, High Low, High Low, High Low, High Low, High Low
(Background whistling provided by the CFTC)
The markets have been manipulated from the moment of inception. The market will always be manipulated in some form or fashion and there is absolutely nothing anyone can do to prevent it. Even back in the roaring twenties you had clubs of rich people who got together, pooled their cash, ramped stocks, dumped stocks. RCA is the perfect example.
The SEC is a complete waste of fucking time. They missed Bernie Madoff and they had that shit handed to them on a silver platter with ALL the evidence and they STILL missed it. It's like an elephant sat on their head and they were none the wiser. The stock market drops 1,000 points in minutes, they have no clue what it was to this day and say it was someones fat finger. Their concern is some bullshit Palladium market with 10 traders and some guy who front run his own shop?
Tranny porn bitchez. Tranny Porn.
Since this practice is not usually a cause for prosecution, some big shot must have got burned or this guy wandered into someone else's territory. Don't mess with Wall Street Cribs and Bloods. Johnny Law works for them.
East-siiiiide!
Btw, it's Crips nigga!
http://www.joeydevilla.com/wordpress/wp-content/uploads/2008/05/la_gang_signs.jpg
or better yet...
http://www.joeydevilla.com/wordpress/wp-content/uploads/2008/05/geek_gang_signs.jpg
the Soros desk was responsible for probably (more than?) half of the [long ago] QCOM runup by jamming the close. three our of five days per week at 3:55 PM ET, jam the price up.
Silly TD--
When Pia bangs the palladium close, it is manipulation.
When JPM bangs the gold close, it is government policy.
There's a big difference here.
After all, JPM and GS are doing God's work...Who are you to question His holy ways?
Oh for christ sakes, this is pure speculation for all parties involved. Lets rename this article as 'The SEC, CFTC, and Tyler all jump into bed together'.
*edit*
Oh, I get it, Catholic. If a israeli-york'er is involved then cloak questioned behavior in obfuscation, and have Lloyd call the dogs off after secret envelope is passed under the table at Scores.
Nice.
That edit is an interesting observation, meT.
I think I'll call this a
+ $1530 and a
+ $470.
And the AAPL options market markers pin the stock at the strike week after week...
Years from now it will be said, again, "But nobody saw this coming!"
And they will be wrong, again.
Why don't we ZH readers come all together and start a fund with
the only aim to show your middle finger by manipulating stocks and make money on the sideline?
100.000 ZH'ers x $ 50.000 = 5 billion.
Leveraged this could easily be 5 Trillion!
Some appropriate names could be:
Middlefinger International(Says it all)
FSEC Capital (fuck SEC)
FUITA & MM Securities (fuck you in the ass and make money)
MMWSYTM. Capital Fund (making moola while showing u the middlefinger)
ZHB Capital (zero hedge bitchez!)
An idea can penetrate 20 feet of armor plate, even an idea to commit fraud.
Expecting humans to resist fraud by using force is also a demonstrated failure.
How to handle fraud seems to require a different technique. Let the brightest work on this.that fraud be
I offer that defining and understanding fraud is first step.
Okay raise your hand, how many have been brought into the Gold price deflation debate?
The historical deflation (generally tied to negative growth) arguments are compelling. I found myself in the "this time is different" camp for Gold moving forward over the next 6 months.
I tried to point out what I thought was the biggest threat to price appreciation and that was legitamate sell side pressure from a non-distressed liquidation(s). That is, a big player(s) slowly liquidating for some legitimate reason.
I then threw my counter bunch of sovereign debt default risk. Using the events and trend data during the first Greek panic (as in I think there will be more).
I guess the debate morphed into the capacity (in actual practice) to try and move obligations into the present based on future growth.
Then it progressed to everyone's favorite, what is the sovereign debt breaking point? When does the influence of the banking cartel (ECB, IMF, FED), become unattainable in political terms.
Gold the sovereign crisis play?
At some point, refinancing will become forgiveness, it is just a matter of terms. However it is worded, it will put risk pressure on the paper currency in question.
----------
Gold was the focal point, but the conversation actually was, in the end, about sound money.
Not just as a medium of exchange, but as the basis for economic prosperity. All the problems distilled into one notion, one concept, without sound money we cannot sustain perpetual growth. The health of the nation depends on sound money.
Mark Beck
well 'tis true "I will not loan you an ounce of my gold to borrow your worthless paper" no matter what the interest rate. Needless to say with interest rates at zero they can hardly wait to part with "the precious."
Greg Coffey was his replacement.
so, where is this school for insider trading and market manipulation?
http://covert2.wordpress.com
I know a money management firm that does it every FRIDAY .... and every Quarterly close
so what , the SEC is too busy surfing
This article summarizes the core business model of every Wall Street commodity trading operation I have even known. The primary purpose of the futures markets as they see it is to provide hedging and price manipulation capability for the OTC contracts they write, which are linked to the futures indices. No wonder Wall Street traders are all behind ETFs like USO, USG, and GLD, which provide sucker funds and liquidity they need to support their lucrative OTC commodity derivatives businesses.
Funny how you never hear about this stuff on CNBC, but, that would imply Maria Bartiromo could understand it. After 15 years of watching her perform, I’m pretty sure Goldman will confess to insider trading before that happens.
the Democrats are in a state of apoplexy over "price" again with Gary Gensler "leading the charge over transparancy." In the meantime "Farmer John with his big potato" is minting money this year. As they say "they might grow gold in September but not wheat or corn." In short "so much for depression this year." DARN IT!
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
cheap site hosting
windows web hosting
windows vps hosting
windows vps