Panther Energy Trading LLC and sole owner Michael Coscia will pay $4.5 million to U.S. and U.K. regulators to resolve allegations that they used high-frequency trading algorithms that manipulated commodities markets.
Panther Energy and Coscia used a computer algorithm that placed and quickly canceled bids and offers in futures contracts for commodities including oil, metals, and foreign currencies. The large buy orders that Panther Energy placed created a sense of strong demand in the market driving the price of the commodity up. Once the price of the commodity went up the small sell orders were executed and then the buy orders were canceled.
Panther and Coscia must pay $2.8 million in fines and disgorgement of profits to the CFTC, $903,000 to the U.K. Financial Conduct Authority.
Federal Reserve chairman Ben Bernanke announced that the U.S. central bank planned to end its five-year quantitative easing program later in 2013. This would effect markets not only in the U.S. but around the globe. Prospects for higher U.S. interest rates and the end of easy money prompted capital outflows from China and other emerging markets.
China's overnight banking lending rates the rates at which banks lend to one another skyrocketed from 11.62% to 12.45% in one day. This is triple the year's average. Since lending rates rose the Shanghai Composite Index witnessed its largest decline in 4 years and continued to decline for a week untill the central bank of China the People's Bank of China agreed to inject liquidity into the market.
"The PBOC's hard-line approach was a wake-up call, signaling that China's new leadership under President Xi Jinping and Premier Li Keqiang is preparing to undertake potentially significant structural reform of the economy, replacing fast growth--driven by low-cost, state-directed investment--with slower growth driven more by market forces, private sector enterprises and consumption." (morningstar).
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