The regulator fined Perkins £72,000 for market abuse
and banned him from working in the financial services industry
on the grounds that he is not a fit and proper person.
In the early hours of Tuesday June 30 2009, Perkins, who was
licensed only to trade Brent crude futures on behalf of a
client, executed a high volume proprietary trade in excess of
7,000 lots, representing over 7m barrels of oil, without client
authorisation. PVM lost nearly $10m when it had to close out
the unauthorised positions, a spokesperson said.
As a direct result of Perkins’ activity, the
FSA said, the price of Brent rose significantly.
Perkins’ trading manipulated the crude market by
giving a false and misleading impression as to the supply,
demand and price of Brent, and caused the price to increase to
an abnormal and artificial level.
Last summer, on a typical day, between 100,000 and 130,000
contracts were traded in the front month of ICE Futures
Europe’s Brent Crude Oil futures. Each contract
represents 1,000 barrels of oil, so total trading is usually
100m-130m barrels of oil a day. Global consumption of all oil
was then around 85m barrels a day.
On June 30, there was abnormally busy – though not
unprecedented – trade, totalling 173,945 contracts.
What was particularly unusual was that there were two spikes of
activity, and one of these was in the small hours of the
morning London time, when there is usually minimal trading.
Trading data from ICE Futures Europe published on FT.com at
the time showed that the first spike occurred between 1am
– when the market opens for the day after a two hour
break – and 4am.
During these three hours a total of 11,744 front month
contracts were exchanged – representing 11.74m barrels
of Brent crude for August delivery. Normally perhaps 600
contracts might be traded during these hours.
It appears likely that Perkins’ activity
contributed strongly to a jump in the oil price to $73.50 a
barrel between 2 and 2.30am London time, after it had opened at
$71.30 at 1am. Brent later closed at $69.23 at 4pm.
"Drunkenness does not excuse market
The FSA asserted that Perkins’ trading appeared
to be the result of extremely heavy drinking due to alcoholism,
which he now acknowledges. Perkins drank excessively over the
weekend before Monday June 29, and throughout the day
In sanctioning Perkins, the regulator took into account the
fact that Perkins had initially lied repeatedly to his employer
to try and cover up his unauthorised trading.
Immediately after this incident, however, Perkins joined a
rehabilitation programme for alcoholics, and he has now stopped
drinking. The FSA chose to limit the ban to five years,
suggesting that Perkins may be rehabilitated over time and may
be fit and proper again in the future.
Alexander Justham, director of markets at the FSA, said in a
statement: "The FSA views market manipulation extremely
seriously. Perkins’ trading caused disruption to
the market and has been met with both a fine and prohibition.
This reinforces the fact that a severe sanction will apply in
cases of market manipulation, even where no profit is made.
"Perkins’ drunkenness does not excuse his
market abuse. 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
Perkins had been due a £150,000 fine, though the FSA
acknowledged that this would cause him serious financial
hardship. The fine was therefore reduced to £90,000.
Given Perkins’ agreed settlement of the case, he
also qualified for a 20% discount under the FSA’s
executive settlement procedures.
Tom Osborn +44 207 779 8361 firstname.lastname@example.org