| June 26
June 26 A lawsuit brought by the U.S.
derivatives regulator against a Chicago speed-trading firm and
its prominent founder claiming they manipulated prices may go
forward, a New York federal judge ruled on Thursday.
U.S. District Judge Analisa Torres said she found
"unpersuasive" a request by DRW Investments and its founder,
Donald Wilson, to dismiss the case brought in November by the
Commodity Futures Trading Commission.
The CFTC had accused Wilson and DRW of manipulating the
price of an interest rate futures contract in 2011.
It said Wilson bought a $350 million position in a
three-month interest rate swap futures contract listed on the
Nasdaq, hoping he could exploit the pricing methodology of that
contract in his favor.
His firm put bids in the market it knew were never going to
be accepted to influence the daily fixing of a rate that
determined the value of a large position they held, the CFTC
said, a practice known as "banging the close."
In seeking to dismiss the case, Wilson and DRW said that
despite setting forth a "dense thicket of technical jargon,
trading charts and graphs," the CFTC failed to show they had
intended to create an artificial price.
But in a 37-page decision, Torres said, "At this stage in
litigation, this court cannot conclude as a matter of law that
(DRW) bids placed and withdrawn at above-market rates reflect
the legitimate forces of supply and demand."
She also rejected the defendants' arguments that the case
did not belong in New York to begin with, pointing to the CFTC's
allegations that the defendants' bids had been placed and
Lawyers for CFTC and Wilson and DRW did not immediately
respond to requests for comment.
DRW invests its own money in markets like a hedge fund, but
without taking on outside clients. DRW has said it was not using
the high-frequency trading techniques it applies elsewhere in
its business to the contracts in question.
Wilson is a board member of the Futures Industry Association
and the head of its Principal Trading Group, which represents
companies trading with their own money, including many of the
best-known speed traders.
(Reporting By Casey Sullivan; Editing by Cynthia Osterman)