Part of my job til late 1996 as Director of Compliance & Market Supervision at the IPE (now ICEFutures) was to deal with the games that went on in relation to IPE's Gas Oil (Heating Oil/Diesel hybrid spec) contract.

This was deliverable in "ARA" (Amsterdam, Rotterdam and Antwerp) area in 100 tonne contract "lots", but typically into barges (there were other delivery mechanisms) that were 1000, 2000 and even 3000 tonners.

On the day of contract expiry (two business days before the 14th of the contract month) the "Exchange Delivery Settlement Price" was set at 12 noon, and when the big players had large outstanding positions it was Europe's largest game of "chicken" and God help any other participants caught in the cross fire during the last morning of trading and right up to the wire.

That was only the start of the guerilla warfare that then went on as the Buyer nominated barges to collect the oil from the ARA installations, and typically took it up the Rhine for delivery to "end users".

It was a "second half of the month" delivery, so buyers would try and pick up the oil as early as possible or as late as possible in the second half, depending on where the physical "barge market" price (1,000 tonne contracts) was.

Only real professionals ever made or took delivery. Dealing with the trading games - and the resulting disciplinary cases and arbitrations -  was for me one of the most interesting parts of the job, and gave me quite a body of experience.

But I digress: Nostalgia isn't what it used to be!

Point is that the purpose of futures markets is NOT delivery, but risk transfer, and 95 to 99% of IPE Gas Oil traded was simply "closed  out" and never went to delivery.

Yes, there IS convergence, after a fashion, on the day of expiry, but even here you must understand that the IPE spec was itself a hybrid, being essentially too good for heating oil, and needing blending to use as diesel.

The trading here - and one firm in Monaco were masters at "in tank" blending to precise specification - was basically to take advantage of "quality giveaway" eg from cargoes of crudely refined gasoil from origins like Ventspils in Latvia.

As for the ICEFutures Brent contract, that is not deliverable at all (being cash settled, like the FTSE) against an Index of "Forward" Brent (now BFO - Brent Forties and Osebjerg) Crude contract transactions.

The Brent forward "15 Day" contract - originally introduced by Shell, but which became a market standard - has always been subject to expert manipulation, and particularly "squeezes" when traders would buy up the available forward cargoes of crude and attempt to make profits from those who had sold cargoes forward "short" as a "hedge", but had not actually bought any from someone who actually owned the stuff.

While manipulation of IPE's cash-settled futures contract did not directly affect the physical/forward market, all sorts of games went on.

These typically involved esoteric "OTC" contracts aimed at hedging the "basis risk" between the futures contract expiry and the actual physical or "spot" delivery some time later in the("Dated Brent") market which actually does form the benchmark price against which 65% of world crude oil is priced.

In fact I got into hot water for alleging (and I had chapter and verse) that the big Investment Banks in particular were routinely manipulating the (then) IPE Brent daily settlement price in view of the profits they could make from sophisticated "swap" contracts priced against these prices at the end of each trading day.

Also they were routinely "date raping" investment funds associated with them - and in all likelihood

Date Rape

still do.

It was all quietly buried (in best British tradition, since I could not be seen to be right) and so was I, as  a treacherous, "bitter and twisted" (five years after I left the IPE!)"whistle blower".

However, the truth of it - and that article is a good example, is now coming out, but it's all a bit late for me. Lost income, marriage, home, the lot. But I think I'm a better person for it.

Not just a Diary there, there's a Book.

"The future is already here -- it's just not very evenly distributed" William Gibson