US Regulators Have Opened a Price Manipulation Probe After a Dispute Between CME and Exchanges
US Commodity Futures Trading Commission is said to have asked for extensive data from crypto exchanges in order to investigate whether there was price manipulation which might have compromised prices in cryptocurrency markets. This investigation was started after the launch of Bitcoin Futures by CME group in December 2017. CME is said to be forming its Bitcoin futures prices based on information and data obtained from four crypto exchanges: Coinbase, ItBit, Kraken, and Bitstamp. It’s reported that manipulative trading in these exchanges could have affected the price of Bitcoin futures.
Regulators from CFTC are looking for trading schemes which could have been used to manipulate Bitcoin futures prices which are directly regulated by the government. After the first contract was completed in January CME asked the exchanges to provide trading data but some of them decline to state that the request was intrusive. The exchange is said to have provided their data for a few hours when CME shortened their time period.
According to Wall Street Journal CME had asked for the information through a third party which calculates the Bitcoin price for use in the futures. WSJ added that the exchanges did not want to hand over the data to a third party.
Investigators from CFTC were not happy because CME did not have an agreement with the exchanges to share data which is related to a futures contract. The Journal added that the investigation was started after a quarrel between CME and exchange officials. However, CME spokesperson said that the company which the exchanges refused to hand over the data to had a disclosure agreement with all the exchanges adding that: “All these exchanges are required to provide us with information and data which include inquiries, investigations, and cooperation.”
Kraken CEO Jesse Powell told the Wall Street Journal that the declared oversight of how Bitcoin prices form futures prices has led to spot exchanges questioning the value of their index participation. People who know the matter well told the Journal that CFTC was carrying the investigation together with the US Department of Justice. The Department of Justice is already carrying out a similar investigation b into Ethereum and Bitcoin price manipulation. The department is said to be looking for ways in which traders can manipulate prices of cryptocurrencies through illegal activities like wash trading.