Las Vegas resident Daniel Shak has been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for attempting to manipulate the price of Light Sweet Crude Oil (WTI) futures contracts in 2008. The CFTC issued an order on November 25, 2013, detailing the charges against Shak and his firm, SHK Management, LLC.
According to the CFTC, Shak and SHK engaged in a manipulative trading strategy known as “banging the close” on two separate trading days. They allegedly established substantial short positions in WTI futures contracts through a process called Trading at Settlement (TAS). Simultaneously, they built offsetting long positions just before and during the two-minute closing period to influence the settlement price of the contracts.
The CFTC found that Shak and SHK aimed to drive up the settlement price of WTI futures, allowing them to profit from the difference between the higher settlement price of their short position and the lower prices paid for the long contracts. Their actions violated intraday speculative position limits set by the New York Mercantile Exchange (NYMEX), exceeding the limits by over 500 contracts on one day and over 1,000 contracts on the other.
As a result of the settlement, Daniel Shak and SHK Management, LLC, were jointly ordered to pay a $400,000 civil monetary penalty. Furthermore, both Shak and the firm are permanently banned from trading in any crude oil markets. Shak also faces a two-year ban from trading any product or financial instrument regulated by the CFTC during the close of trading.
“Today’s action by the CFTC shows that the misuse of TAS trades and offsetting of TAS positions during the close of trading to affect settlement prices unlawfully will not be tolerated,” stated Gretchen L. Lowe, Acting Director of the CFTC Division of Enforcement.
The case was led by CFTC staff members James H. Holl, III and Gretchen L. Lowe.
Source: CFTC.gov
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