August 27, 2013
Attain Capital
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It’s not every day you see a Forbes 400 Member settle a class action suit surrounding market manipulation – but that was exactly the news last week as Futures Industry ‘Hall of Famer’ Louis Moore Bacon’s firm Moore Capital agreed to pay $48 Million to settle allegations of manipulating Platinum and Palladium prices.
Bacon happens to be one of the 400 richest people in the United States. A self-made billionaire, Bacon got his first finance job after spending the summer working on a fishing boat owned by NYSE board member Walter Frank. This led to his job as runner on the NY Cotton Exchange, from which he transitioned to a broker then Sr. Vice President of Shearson Lehman Brothers futures trading division. He started Moore Capital in the late 80s, and all it’s done since then has become one of the largest hedge funds on the planet while propelling Bacon into the billionaire ranks.
The allegations of market manipulation stem back to 2010, when Moore agreed to pay $25 million without admitting or denying the charges after the CFTC made allegations of an illegal practice referred to as “banging the close.” In case you’re wondering, Reuters provides a rather concise definition of the phrase:
“The U.S. regulator alleged the fund [Moore] was entering trades in the last 10 seconds of trading in a manner designed to exert upward pressure on the settlement prices. The practice is known as “banging the close.”
Were they really trying to “bang the close,” or were they just trying to enter or exit that market, with billions under management, and as such doing huge number of contracts on the close? Just looking at some rough numbers – a $10 Billion fund risking 0.25% (1 quarter of 1%) of capital on each trade and risking an average daily move of say, $10,000 per contract (200 points in Platinum – about 10% of the price in 2007/2008) would be looking at trading 2,500 contracts at a time. Platinum at the time had average daily volume of about 1,500 contracts. So spreading your trade out over 5 days, for example, would have resulted in 500 or more contracts (1/3 of the volume) on the close every day for 5 days – which would surely be enough to move a market like Platinum into the close.
Now, managed futures managers have been known to trade Platinum and to a lesser extent Palladium on a longer term trend following basis, but that’s where things get weird in this story – because the chart of Platinum in the latter half of 2008 goes straight down just like every other commodity and risk on asset at that time. There sure didn’t look to be odd market behavior on a longer time frame. At the same time – Platinum and Palladium are known amongst traders as some of the most illiquid commodity markets, and generally (in our experience) avoided by most active traders for fear of having trouble getting out. So, what were they doing in that market in size? I guess we’ll never really know what went down… Anyway, it is all over now, and Moore Capital is even allowed to trade that market on the close again after a 3 year hiatus was ordered by the CFTC in 2010.
What’s it mean for you? Well, while we’re not big fans of the sort of ambulance chasing done by a lot of class action lawyers, if the money is getting paid out – and you did trade Palladium or Platinum between 2006 and 2010, why not submit your claim for part of it. Just don’t expect to retire – it will likely be one of those miniature checks you get for $8.23 or so.
PS – speaking of Platinum, whatever happened to the idea of minting the $1 Trillion coin to avoid the US Debt ceiling?
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.
Limitations on RCM Quintile + Star Rankings
The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.
See the full terms of use and risk disclaimer here.
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
The programs listed here are a sub-set of the full list of programs able to be accessed by subscribing to the database and reflect programs we currently work with and/or are more familiar with.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. Individuals cannot invest in the index itself, and actual rates of return may be significantly different and more volatile than those of the index.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.
Limitations on RCM Quintile + Star Rankings
The Quintile Rankings and RCM Star Rankings shown here are provided for informational purposes only. RCM does not guarantee the accuracy, timeliness or completeness of this information. The ranking methodology is proprietary and the results have not been audited or verified by an independent third party. Some CTAs may employ trading programs or strategies that are riskier than others. CTAs may manage customer accounts differently than their model results shown or make different trades in actual customer accounts versus their own accounts. Different CTAs are subject to different market conditions and risks that can significantly impact actual results. RCM and its affiliates receive compensation from some of the rated CTAs. Investors should perform their own due diligence before investing with any CTA. This ranking information should not be the sole basis for any investment decision.
See the full terms of use and risk disclaimer here.