Magazine article Modern Trader

P-Tech Resolution Falls Short for Some

Magazine article Modern Trader

P-Tech Resolution Falls Short for Some

Article excerpt

In January, the CFTC concluded its investigation into the Pacific Stock Exchange Technology Index options when it settled an enforcement action against Norman Eisler, former New York Futures Exchange (Nyfe) chairman and the man the CFTC found solely responsible for the manipulation of settlement prices on P-Tech options from August 1999 to May 2000.

When the scheme fell apart in May 2000, it led to the failure of long-term FCM Klein & Co., which cleared Eisler's trades, cost several individual traders their life savings and caused millions of dollars of losses to a hedge fund and its customers. Lawsuits followed, including one in which the CFTC sued the New York Board of Trade (Nyfe's parent) for failing to enforce its own rules for determining settlement prices and settled for $75,000.

The CFTC found that Eisler, as a member of the Nyfe settlement committee, manipulated prices for the benefit of his First West trading account in excess of $2 million per day.

The CFTC order, entered with the consent of Eisler and First West but without their admitting or denying the finding, requires them to pay a civil penalty of up to $4.9 million, revokes Eisler's CFTC registration and bars him from trading on any registered entity. The fine is slightly more than the $4.8 million margin deficit the CFTC says Eisler's account fell to once he no longer set settlement prices on May 15, 2000.

One series of events that took place nine months prior to the scheme unraveling illustrates the extent of the manipulation. On Aug. 30, 1999, with Eisler out of town, some locals and a market maker in P-Tech options demanded of the settlement committee that P-Tech options be settled fairly. …

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