The American authorities made big headlines last week when they seemed to have uncovered another attempt to “spoof” global markets.
Following the sensational case of Navinder Singh Sarao, the alleged spoofer who is said to have caused US$800 billion worth of damage to financial markets in 2010 and is wanted by the US department of justice, the Commodity Futures Trade Commission, a Washington regulator, claimed it had foiled another plot to rig markets, this time in gold and silver trading.
And what’s more, the CFTC had taken immediate action to halt the plot and bring the perpetrators to justice. It filed an action in the New York courts identifying two UAE-based traders, Nasim Salim and Heet Khara, freezing their trading accounts and seeking punitive damages against them.
How impressive. Just as world markets in precious metals were encircled and in danger of massacre, the CFTC cavalry came riding over the hill to save the day. John Wayne couldn’t have asked for a better script.
Except that, on careful examination, the alleged plot looks much less convincing, and the plotters much less sinister, than the CFTC would have you believe.
Whereas in the Sarao case there were hundreds of billions of dollars at stake, in the Salim-Khara court papers the sums are minuscule in comparison. None of the transactions involve more than $1 million, and most are less than half that sum.
The CFTC seems to recognise this in the court filing, embarrassingly seeking a fine of only $140,000 as punishment. That will be less than the legal cost of bringing the action, but who cares when such a dastardly plot – to debase gold and silver markets, no less – has been snuffed out?
Again, the evidence in the New York filings tells a rather different story. The alleged trades involved a very small number of contracts, in a market where hundreds of thousands are traded every day. How could the conspirators’ actions have spoofed markets? They were simply too small to have any noticeable affect. It would be like trying to rig the multi-trillion dollar global forex market via a remittance transaction at UAE Exchange.
There may be a huge plot lurking somewhere there, but the evidence so far does not suggest a global conspiracy hatched in Dubai.
Maybe that’s why the US authorities have been so slow in seeking help from their UAE counterparts. As far as I can tell from calls to all the Emirates regulators that might be involved, none has been contacted by the Americans.
There is a civil action being heard in New York of course, and we should await that verdict. But so far it seems more like an old-fashioned bit of showboating by publicity-hungry US authorities.
fkane@thenational.ae
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