Magazine article Modern Trader

Locals Sue in Nybot Saga

Magazine article Modern Trader

Locals Sue in Nybot Saga

Article excerpt

Three New York Board of Trade (Nybot) locals are suing the exchange and Norman Eisler, former chairman of the New York Futures Exchange (Nyfe), division of Nybot, for $60 million. The locals claim the defendants permitted erroneous settlement prices in the Pacific Stock Exchange Technology index options contracts.

The plaintiff's claim that the settlement committee did not follow normal procedures in setting settlement prices at the end of the day, the result of which had a profound impact on margin requirements. The plaintiffs say the miscalculation in P-Tech options settlement prices began prior to Jan. 1, 2000, and continued until approximately May 15, 2000.

Eisler was not only chairman of the exchange but also chairman of the settlement committee for the P-Tech Index futures and options contracts. One plaintiff, Mike Vitanza, claims Eisler manipulated settlement prices to favor his own positions over a period of two years by as much as 80% before being discovered.

The suit claims that the miscalculation of the settlement prices led to the collapse of the P-Tech contract and once those settlements prices were corrected led to the collapse of futures commission merchant (FCM) Klein & Co. due to losses sustained by Eisler. (See Trendlines, Futures, August 2000)

According to the suit, in May 2000 Eisler's account faced a margin call that he could not meet. As a result, Eisler was suspended from Nyfe. After Eisler's suspension, settlement prices in the P-Tech options were calculated correctly and were in large contrast to previous settlements. …

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