US Commodity Futures Trading Commission v. Donald R. Wilson and DRW Investments, LLC

In a long-running dispute concerning alleged market manipulation, a federal judge cited the testimony and expert report of Analysis Group affiliate Jeffrey Harris in his opinion clearing Donald R. Wilson and his trading firm, DRW Investments, of wrongdoing.

In 2010 and 2011, Wilson purchased more than $350 million notional value of interest rate swap futures, contracts that allow traders to bet on future movements in interest rates. When the contracts’ settlement prices failed to rise to their fair values, Wilson on several occasions placed exchange bids on them during a 15-minute time period known as the settlement window. The US Commodity Futures Trading Commission (CFTC) brought suit against Wilson and DRW, claiming that the bids amounted to an illegal attempt to artificially inflate the settlement price of the underlying contracts, a technique known as “banging the close.”

On behalf of Wilson and DRW, an Analysis Group team that included Managing Principal Michael Cliff and Vice Presidents Anne Catherine Faye and Samir Warty supported Professor Harris, who filed an expert report and testified at trial. He opined that the bids were part of a legitimate trading strategy, that the true value of the contracts was higher than the bids placed by Wilson, and that the bids contributed to price discovery (the determination of an asset’s price by market operations) rather than price inflation.

In ruling for Wilson and DRW, US District Judge Richard Sullivan of the Southern District of New York wrote in his opinion that “[d]efendants’ economic expert, Jeffrey Harris, was particularly credible on these points, and … was able to explain a methodology for ascertaining the fair market value for the Three-Month Contract even in a highly illiquid market.”

Read a news article about the case and the district court’s opinion (subscription required)