April 30 (Bloomberg) — Moore Capital Management LP, Morgan Stanley and UBS AG’s securities division agreed to pay more than $39 million to settle separate allegations regarding trading on the New York Mercantile Exchange.
Moore Capital, the $15 billion hedge fund run by Louis Bacon, will pay $25 million to settle the U.S. Commodity Futures Trading Commission’s allegation that a former portfolio manager attempted to manipulate platinum and palladium futures during a surge in prices two years ago, the regulator said yesterday.
Morgan Stanley will pay $14 million and UBS $200,000 for a separate allegation that they concealed a block trade of crude oil from Nymex, the CFTC said in a separate statement yesterday.
In the platinum and palladium case, a Moore portfolio manager, who wasn’t identified, used buy orders in the closing moments of trading on Nymex to boost settlement prices from November 2007 through May 2008, the CFTC said. The orders “frequently accounted for a significant portion of the volume” in the two thinly traded markets, the agency said.
Platinum futures rose 39 percent from Nov. 1, 2007, to May 30, 2008, touching a record $2,308.80 an ounce on March 4, and palladium jumped 17 percent, touching a six-year high of $600 an ounce, also on March 4. Both palladium and platinum are used in jewelry and pollution-control components for cars.
The manager sought to influence the exchange’s volume- weighted settlement price with buy orders for 20 to 100 contracts, according to the agency. A platinum contract is 50 ounces, and a palladium contract is 100 ounces.
No Principals Involved
New York-based Moore said in a statement yesterday that the portfolio manager left the company in the fall of 2008. None of Moore’s principals nor its current management were involved in any improper trading, and none were accused of any wrongdoing, the company said.
Nymex rules require trades such as the one between Morgan Stanley and UBS to be reported within five minutes of being conducted.
Instead, a Morgan Stanley trader asked “at around mid-day on Feb. 6, 2009” that his UBS counterpart in the trade not report it until after oil futures had stopped trading at 2:30 p.m. in New York, which the UBS broker did, according to the CFTC’s statement yesterday. Each side of the trade involved 33,110 crude futures contracts, the CFTC said.
The CFTC order also requires Morgan Stanley to create enhanced surveillance of Trade At Settlement transactions on Nymex within 90 days, according to the statement.
“Morgan Stanley fully cooperated with the CFTC’s investigation and is pleased to have reached a resolution with our regulator,” spokeswoman Jennifer Sala said in an e-mailed statement yesterday. “As the CFTC indicates, this matter concerned an isolated request by a former Morgan Stanley trader.”
UBS spokeswoman Kelly Smith declined to comment yesterday.
To contact the reporters on this story: Matthew Leising in New York at firstname.lastname@example.org; Whitney McFerron in Chicago at email@example.com.
Last Updated: April 30, 2010 08:57 EDT