‘Trump Confusion Trades’ Netting Over $2 Billion Reeks of Insider Trading

October 23, 2019 14:30 UTC

Vanity Fair reported four mysterious trades that happened in June and September. These trades were out of the ordinary because the trader or group of traders responsible bought tens of thousands of S&P e-mini contracts minutes before the markets closed. What makes these trades more suspicious is the fact that market-changing events such as the attack on a Saudi oil-producer took place after the trades were placed. Was insider trading involved?

One catalyst that sent markets tumbling to the benefit of a trader who shorted S&P e-mini contracts before the attack. | Source: Twitter

One of the trades was placed on Sept. 10. Someone purchased 82,000 e-mini contracts ten minutes before the Chicago Mercantile Exchange closed. The following morning, China announced that it would lift tariffs on a number of U.S. merchandise. Trump responded by postponing tariffs on select Chinese products. The confluence of events rewarded the person with $190 million in profits.

There are three other trades that followed the same formula; buy at the close and wait for a fortuitous event to happen. One of those trades allowed a trader to make a killing to the tune of $1.8 billion in about a week.

Is it pure luck that powered these insane profits or is there a heinous collusion involved? We interviewed a former banking regulator and a slew of traders. Most of them believe that no one is that fortunate.

Former Regulator: ‘The Financial Markets Are Notorious for Being Driven by Emotion Rather Than Logical Decisions’

Those who trade before the market closes are often consumed by the fear of missing out. Sukhi Jutla, who worked in the financial industry implementing regulations to prevent market manipulations, agrees. She told CCN,

Banks spend a lot of time and money in implementing processes to prevent market manipulation activities.

She added,

One of these practises includes placing excessive trades 15 mins prior to the markets closing as there is a lot of volatility in the markets during closing / opening times and volatility is where the money is made. Where huge sums of money are being made at these times, it is likely that there is insider trading occurring. The trading markets are riding on waves of greed and emotion and many humans will react to this by placing trades they know they shouldn’t.

Jesse Cohen, analyst at financial markets platform Investing.com, affirms Jutla’s view. The analyst said,

There is something definitely rotten going on in financial markets and it reeks of manipulation. President Trump, and authorities in Beijing to the same extent, understand that all it takes to spark a rally or cause the market to dump is a single tweet.

No One Is That Fortunate, Say Traders

Almost all of the traders we asked had the same answer: No one’s that lucky. For instance, Hatem Dhiab, managing partner at Gerber Kawasaki, said,

It’s really tough to see that someone is this lucky and able to wager such huge [amounts] at close of markets.

Mati Greenspan, senior market analyst at eToro, also sees something afoul at play. He told CCN,

Insider trading rules do not apply to heads of state.

JM Vala, co-founder of LayupTrades, also doesn’t believe these traders were incredibly lucky. He said,

I think it’s hard to believe it was luck, but there’s no proof, so hard to really have anything done about it.

Trader Renato Santos sees something nefarious afoot. He said,

They’re playing the easiest game on Earth that allows them to make billions overnight! All orchestrated by the big money guys!

However, Andy Cheung, head of operations at OKEx sees the trades in a different light. He told CCN,

Trades coming down inside this [15 minute] window likely means they were a hedge. Portfolio managers are handling billion-dollar portfolios and liquid products like e-minis offset losses on the same scale.

Whether these trades were a hedge or were acted upon with full knowledge of what was about to happen, we’ll never know until authorities launch an official investigation.

This article was edited by Sam Bourgi.

Last modified: October 23, 2019 14:00 UTC

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@kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk kirilnikk123@gmail.com