When we last checked in with Dan Shak, way back in 2013, the professional poker player, former hedge fund manager and petty ex-husband was settling allegations that he illegally gamed the gold futures market by banging the close at his old hedge fund, SHK Management. At about the same time (the time he was suing his ex for an equitable share of her high-heel collection), he was planning to get back into the hedge fund game, having shuttered his SHK Management abruptly two years earlier. Then, nothing. Silence. Now, thanks to an old friend and this article by his current employer about the eminently manipulable trade-at-settlement contracts, we may have an inkling why.
Dan Shak, a hedge fund manager and professional poker player who once sued his ex-wife for 35% of her $1 million shoe collection, was fined $400,000 and prohibited from trading during settlement periods after being charged with abusing TAS. He paid an additional $100,000 after he was found to have traded during the settlement window for gold a year later. He said it was an accident.
Sounds like a perfectly understandable mistake by a self-proclaimed “self-employed commodities trader” of what was then 33 years to make, and not at all like the actions of the 83-winningest poker player in history who since his settlement-window exile has played in dozens of professional tournaments around the world, given how very little juice and excitement there is in playing the TAS game, and how very unlike poker it sounds.
When Chris Cook was responsible for keeping the pit traders in check at the International Petroleum Exchange in London, they used to call the daily crude oil settlement “Grab a Grand….” TAS was devised to help funds that merely wanted to track the price of oil, but before long some traders figured out that the settlement could be nudged and that there was money to be made by taking the other side of transactions with parties who didn’t much care about the price….
TAS’s vulnerability lies in the fact that it allows traders to quietly build a position without affecting the price… TAS is inhabited largely by the “uninformed,” so trading there doesn’t have the same market impact, and it’s this “asymmetry that makes manipulation possible,” he writes.
Oil Bonanza at U.K. Firm Casts Light on Price-Blind Trades (Bloomberg)