An oil trader who began a drinking binge at a company outing and later traded so many futures that he significantly raised global crude prices, has been banned and handed a £72,000 fine by the Financial Services Authority.
Stephen Perkins’ huge amount of unauthorised trades, mostly from his laptop at home, were spotted by an administrator on his company’s back office IT system. This raised a line of queries that led to Perkins being caught.
The £345 million trades,for seven million barrels of oil on the international ICE futures market, raised the global price of Brent crude oil by $4 to an “abnormal and artificial level”, the FSA said. At one point Perkins’ actions accounted for 69 percent of global volumes traded. It also left his company nursing a reported £6 million loss after he attempted to sell off the excess purchases.
Perkins, a senior broker at PVM Oil Futures, which claims to be the world’s largest independent oil broker, carried the trades from home on 29 June last year and during the early hours of the morning on 30 June. He traded during what he called a “blackout” after binge drinking at a PVM golf weekend and throughout the days at home afterwards. One of the trades was ordered by an unnamed client, but the rest were not.
The online trades were conducted from Perkins' laptop at home on the Java-based webICE platform, created by the ICE exchange, which can be accessed through a web browser.
An administrator working at PVM, monitoring the back office systems early in the morning on 30 June, noticed the unusually high volume of trades and called Perkins at 7.45 a.m. to ask who they were for – so that he could pass them on to the relevant clearer. Perkins claimed the client had been at his home, ordering the trades.
PVM’s compliance officer then phoned Perkins immediately and told him to stop trading from home, and for Perkins to ask the “client” to make orders direct to the PVM Brent crude oils desk. Perkins – who had texted in sick – agreed, but then continued making trades online from home.
The compliance officer, seeing the continued trades, phoned Perkins at 10 a.m. and challenged him – and Perkins finally admitted the trades were unauthorised.
The company had not been sure the trades were unauthorised until Perkins admitted his actions after the two days of trading. It is also not known whether the IT systems directly highlighted the problem or whether it took the correct judgement of the clerk looking at the details.
PVM said only that the matter was "fully closed" and declined to give details of the events. The FSA made no criticism of PVM in its enforcement notice and noted that Perkins had deceived PVM by insisting the trades were to fulfil client orders.
Perkins has been banned from trading for at least five years and is attending a rehabilitation programme for alcoholics. He will pay his fine at a rate of £2,000 per month.
Meanwhile, as the oil market suffers following BP’s disastrous oil spill in the Gulf of Mexico, the FSA said Perkins’ actions had damaged the reputation of the ICE futures exchange.
"Perkins' trading caused disruption to the market and has been met with both a fine and prohibition,” said Alexander Justham, director of markets at the FSA, who branded the trading as “market manipulation” because of the effect on oil prices at the time.
He added: "Perkins has been banned because he is not a fit and proper person to be involved in regulated activities and his behaviour posed a risk to the proper functioning of the market."
Perkins saw his fine reduced to the £72,000. The original £150,000 fine could have presented him with “serious financial hardship”, the FSA stated.
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