Friday, 3 July 2009

'Rogue trader' suspected of running up £6m crude oil loss at London office of PVM Oil Associates

A "rogue trader" is suspected of causing $10m (£6m) of losses at the London office of PVM Oil Associates, the world’s biggest broker of over-the-counter oil derivatives.
A senior, long-standing broker, believed to be Steve Perkins, left this week, amid fears that “unauthorised trading” could have caused an eight-month high in Brent crude oil future prices.
The company, which employs 80 staff at its West End offices, is now investigating past trading.
A number of senior brokers – the company's only shareholders – are expected to be the main losers from the "rogue trades" Mr Perkins is suspected to have run up in Asian trading during the early hours of Tuesday morning.
Oil traders were "puzzled" later in the day by a spike in London Brent crude futures during the usually quiet Asian trading on that day, pushing prices up to an eight-month high of $73 per barrel.
Prices leapt by more than $1.50 a barrel in under half an hour at around 2am. Ten times the usual volume of futures contracts changed hands in just one hour.
Some traders suggested at the time that it could be down to hedge funds consolidating at the end of the quarter or buy-stops being set off by the unexpected spike.
However, PVA Oil became suspicious after its computer systems alerted the company to "unusual trading patterns". It immediately notified the Financial Services Authority and began unwinding the 'unauthorised' positions it found.
"Nothing like this has ever happened here before in PVM's whole history," a source said. "The company has been the victim of a huge loss but it has been absorbed. If it hadn't, the brokers wouldn't still be trading."
In a statement issued by Robin Bieber, managing director of PVM Oil Futures, the company stressed that its margin calls had been met and that it was conducting business as usual.
"As a result of a series of unauthorised trades, substantial volumes of futures contracts were held by PVM," the company said. "When this was discovered, the positions were closed in an orderly fashion. PVM expects the highest standards of conduct from its people and takes contraventions of those standards extremely seriously."
The trades were placed on ICE Futures Europe, part of the Intercontinental Exchange, where traders can buy or sell crude oil for delivery in several months' time, effectively betting on whether prices will go up or down.
Oil-producing states have long blamed speculators for unexpected oil price spikes. Prices rose to $147 per barrel last July, then slumped to just $40 per barrel just six months later.
Last month, a former oil trader at Morgan Stanley in London was banned by the FSA for trying to conceal some short positions on oil futures that he ran up without permission.
Sarah Stashak, ICE director of investors relations, said she could not discuss the case referred by PVM, but said serious breaches would be referred to the regulator.
"We have a very sophisticated supervisory and compliance team in London and they have the power to implement disciplinary actions or get the FSA involved," she said.
PVM declined to expand on its statement and Mr Perkins could not be reached for comment last night.

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