Detecting price artificiality and manipulation in futures markets: An application to Amaranth

Abstract

In this article we propose a general method to test whether economic data support the claim of futures market manipulation. We examine the question of whether or not Amaranth manipulated the market for natural gas futures using three alternative methods. The first is our contribution to the existing body of literature on the analysis of manipulation claims. The subsequent two have previously been discussed in the literature. All three methods yield the same result: economic data on futures prices and Amaranth's trades do not support the claim that Amaranth manipulated the natural gas futures market in 2006.

Has the VIX index been manipulated?

“…In a follow-up article, the authors examined whether Amaranth's spread trading affected prices of calendar spreads, particularly the winter-summer spreads (Marthinsen and Gai, 2010b). Saha and Petersen (2012) also used the Amarnath dataset. They proposed a method to examine both whether prices were artificial and whether alleged manipulator's trades caused the price artificiality.…”

Untitled

“…They also tried to find out whether manipulation strategies such as corners and squeezes were useful for manipulation in futures markets. Saha and Petersen (2012) empirically investigated whether manipulation had actually occurred in futures markets by employing regression and correlation analyses. Other researchers investigated different aspects of manipulation in stock market through theoretical or empirical studies.…”