On Wednesday, Vanity Fair published an article pointing out several cases of suspicious timing between extremely large e-mini S&P 500 futures market trades and subsequent announcements from President Donald Trump on trade negotiations with China.
“The precision and timing of these trades, and the vast amount of money being made as a result of them, make the traders wonder if all this is on the level,” William D. Cohan, Vanity Fair special correspondent, said in the story.
Cohan joined Benzinga’s PreMarket Prep program on Friday and discussed the so-called “Trump chaos trades.”
The Chicago Mercantile Exchange took Cohan's allegations of suspicious trading activity seriously, but ultimately the exchange and various regulatory bodies either chose not to comment on the story or said they didn’t see any specific evidence of wrongdoing, he said.
When asked if there is any evidence that potential insider trading is coming from within the U.S. rather than from China, Cohan said there’s a good chance that China may be involved.
“We’re in the realm of total speculation, but it wouldn’t surprise me if Trump said hey look, my tweets, my commentary about the tariff negotiations, moves the markets. You guys might want to get in on this too.”
Identifying The Sources
Cohan said there should be a way for regulatory bodies like the SEC and the CFTC to see which accounts are responsible for the large, suspiciously timed trades.
“I don’t think it’s hard for the regulators, the SEC, the CFTC even the CME, to find out who has made these trades and if there’s anything to it. I was just reporting observations that people who trade these e-minis have been making to me over the last four or five months,” he said.
Experienced traders have been noticing large, suspiciously timed and apparently extremely profitable trades, Cohan said.
He said he doesn’t understand why regulators aren’t taking the same approach to this activity that they would take to similar suspicious trading activity ahead of a major corporate event, such as a merger announcement.
"They should be looking at this exactly as they would as if it were a merger announced and there was unusual trading activity in front of the merger. This should not be hard for the regulators if they are doing their job and if they are not totally in the pocket of Donald Trump."
It's easy to write off these types of potential insider trades as not particularly harmful to the market or its participants, but traders should understand that every trade has two sides and someone always gets hurt. Insider trading is a serious crime with a maximum criminal penalty of 20 years in prison.
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President Donald Trump boards Air Force One at Joint Base Andrews on Thursday, Oct. 17. White House Photo by Shealah Craighead.
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