Darrell Zimmerman

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Darrell Zimmerman is Canadian who is an ex-Chicago-based futures trader who gained notoriety for his attempt to manipulate the 30-year bond futures market at the Chicago Board of Trade (CBOT) in 1992. His actions led to significant market disruption and resulted in regulatory action against him.
== Background ==
Zimmerman was a local trader at the CBOT, known for his aggressive trading style and high-risk strategies. He had been trading in the bond futures pit for several years before his infamous attempt to manipulate the market. Prior to the 1992 incident, Zimmerman had a history of reckless trading, including a notorious episode during the 1987 stock market crash.
=== The 1987 Incident ===
During the stock market crash on October 19, 1987, Zimmerman, then a pit trader at the Chicago Mercantile Exchange (CME), was significantly over his limit selling S&P 500 put options. When confronted by his wife about hedging his positions, he famously pulled out two first-class tickets to Hawaii, calling it his "O'Hare hedge." This incident led to both Zimmermans being fired from their jobs at the CME.
== The 1992 Market Manipulation Attempt ==
On October 22, 1992, Zimmerman, along with Anthony Catalfo, attempted to corner the 30-year bond futures market at the CBOT. However, their scheme was not spontaneous. According to a federal indictment, the two men had been laying the groundwork for their trading frenzy weeks in advance.
As early as July 1992, Zimmerman and Catalfo met with several unidentified brokers who worked in the bond and options pits. They offered "false representations and lies" to convince these brokers to accept the huge orders they planned to send into the two trading arenas. They told floor brokers that they represented "a wealthy Canadian family" and "large trading funds" and would soon be sending "some size" (large orders) into the bond and options pits.
On the morning of October 22, just before markets opened, Zimmerman wrote a $50,000 personal check to Stern & Co., his clearing firm, in an attempt to ease their last-minute concerns about clearing his trades. However, at the time the check was written, Zimmerman's account showed a $1,100 debit balance. The government also charged that Zimmerman overstated his assets and income, falsely claiming a net worth of $120,000 and annual trading profits of about $120,000. He also failed to disclose that he owed about $78,000 to an unidentified clearing firm for previous CBOT trading debts.
Zimmerman's trades were cleared by Lee B. Stern & Co., which suffered a $8 million loss and lost its clearing firm status as a result of the fraud. Catalfo's trades for the profitable put side of the trade, reaping about $1.4 million, was cleared by Goldenberg, Hehmeyer & Company.
Zimmerman's actions caused significant disruption in the bond futures market. The price of the December contract fell sharply, diverging from the price of the underlying cash bonds. This price distortion raised concerns among market participants and regulators about potential market manipulation.
== Legal Consequences ==
The Commodity Futures Trading Commission (CFTC) quickly responded to the market disruption. On October 22, 1992, the CFTC filed a civil complaint against Zimmerman, charging him with attempting to manipulate prices and corner the market.
Zimmerman fled to Canada following the incident. While a fugitive, he gave an incriminating interview to Worth magazine, bragging about the scheme and revealing that he and Catalfo had planned it while playing golf the previous summer. Catalfo was found guilty on six counts of wire fraud by a Federal jury in Chicago.
In September 1996, Zimmerman pleaded guilty to two counts of wire fraud. On December 18, 1996, U.S. District Judge William Hart sentenced him to 15 months in prison, followed by three years of supervision after release. Zimmerman was also ordered to pay $10,000 in restitution and to be deported to his native Canada after serving his sentence.
== Aftermath ==
The Zimmerman incident led to increased scrutiny of trading practices in futures markets and discussions about the need for more robust risk management systems at exchanges and clearing firms. It also highlighted the potential for individual traders to cause significant market disruptions.
The CME instituted the "Zimmerman Rule" prohibiting any trader from profiting from overlimit positions.
== Later Life ==
After serving his prison sentence, Zimmerman pursued a career as a jazz musician. He became an active participant in Vancouver's Occupy Wall Street movement and ran unsuccessfully for mayor of Vancouver twice.
== Education ==
== References ==	
Category:Traders
Category:Market Manipulation
Category:Chicago Board of Trade
Category:Chicago Mercantile Exchange
Category:Futures
Category:Bond Market
Category:Commodity Futures Trading Commission