Showing posts with label FUTURES CONTRACTS. Show all posts
Showing posts with label FUTURES CONTRACTS. Show all posts

Sunday, September 23, 2012

BIG BANK PAYS FINE FOR VIOLATING WHEAT FUTURES SPECULATIVE POSITION LIMITS

Photo From: Wikimedia
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
September 21, 2012

CFTC Orders Citigroup Inc. and Citigroup Global Markets Ltd. to Pay $525,000 Penalty for Violating Wheat Futures Speculative Position Limits

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges that Citigroup Inc. (Citigroup) of New York, N.Y., and Citigroup Global Markets Ltd. (CGML) of London, England, exceeded speculative position limits in wheat futures contracts in trading on the Chicago Board of Trade (CBOT), which is part of CME Group, Inc. The CFTC order requires Citigroup and CGML to pay a $525,000 civil monetary penalty and cease and desist from further violations of section 4a(b)(2) of the Commodity Exchange Act and CFTC regulation 150.2, as charged.

The CFTC order finds that on several occasions in December 2009, Citigroup, via two of its wholly owned subsidiaries, including CGML, held aggregate net long positions in the wheat contract traded on the CBOT in excess of the CFTC’s all months speculative position limits. Additionally, on one or more days in December 2009, CGML individually held net long positions in wheat contracts that exceeded the all months speculative position limits established by the CFTC, the order finds. The position limit for CBOT wheat was 6,500 contracts for all months combined.

CFTC Division of Enforcement staff members responsible for this case are Michael R. Berlowitz, Trevor Kokal, David Acevedo, Jeremy Cusimano, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.

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Saturday, April 7, 2012

CFTC CHARGES ROYAL BANK OF CANADA WITH WASH SALE SCHEME


FROM CFTC
CFTC Charges Royal Bank of Canada with Multi-Hundred Million Dollar Wash Sale Scheme
CFTC also charges that bank concealed material information from, and made material false statements to, a futures exchangeWashington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a complaint in federal district court in New York charging theRoyal Bank of Canada (RBC), a Canadian bank and financial services firm doing business in New York, with conducting a multi-hundred million dollar wash sale scheme in connection with exchange-traded stock futures contracts. The CFTC’s complaint also alleges that RBC willfully concealed, and made false statements concerning, material aspects of its wash sale scheme from OneChicago, LLC (OneChicago), an electronic futures exchange, and CME Group, Inc. (CME Group), the entity that exercised the regulatory compliance function for OneChicago.

From at least June 2007 to May 2010, RBC allegedly non-competitively traded hundreds of millions of dollars’ worth of narrow based stock index futures (NBI) and single stock futures (SSF) contracts with two of its subsidiaries that RBC reported as “block” trades on OneChicago.  The CFTC’s complaint alleges that RBC’s NBI and SSF trading activity, which accounted for the majority of OneChicago’s volume during the relevant period, constituted unlawful non-competitive trades, wash sales and fictitious sales.

Specifically, according to the CFTC’s complaint, RBC’s NBI and SSF trades were not negotiated at arm’s length between the counterparties to the trades, as required by law, but were instead designed and controlled by a small group of senior RBC personnel acting on RBC’s behalf.  The trading scheme was allegedly designed as part of RBC’s strategy to realize lucrative Canadian tax benefits from holding certain public companies’ securities in its Canadian and offshore trading accounts.

Prior to each trade, RBC allegedly identified stocks in U.S. and Canadian companies that RBC believed would generate a tax benefit.  RBC and a subsidiary allegedly bought and sold these stocks, and also bought and sold NBI or SSF futures contracts written on the stocks opposite each other.  According to the complaint, RBC’s futures trading was conducted in a riskless manner that ensured that the positions, profits and losses of each RBC counterparty washed to zero, in disregard of the price discovery principles of the futures markets, which resulted in a financial and position nullity for RBC while allowing it to reap the tax benefits.

In addition, the CFTC’s complaint alleges that, from at least January 2005 to April 2010, RBC unlawfully concealed material information from, and made false statements to, CME Group concerning RBC’s SSF trading activity.  Specifically, the complaint alleges that when RBC purported to describe the trades to CME Group, RBC falsely stated that its SSF trading was conducted at arm’s length between the counterparties to the trades, and concealed the fact that the trading strategy was created and managed by a group of senior RBC personnel acting on RBC’s behalf.  In addition, the complaint alleges that RBC concealed from CME Group the fact that it had intentionally designed its stock futures trading strategy to exclude non RBC-affiliated parties from RBC’s futures trades.

“A fundamental purpose of the futures markets is to provide an arm’s-length mechanism for market participants to discover prices and shift risks associated with products traded in those markets,” said David Meister, the Director of the CFTC’s Division of Enforcement.  “As we allege, RBC not only designed and executed a wash sale scheme that undermined that purpose, it went a step further and misled the exchange into believing that its conduct was lawful.  Today’s action should make clear that the CFTC will not hesitate to bring charges against even the most sophisticated market participants who unlawfully exploit the futures markets for their own gain.”

In its continuing litigation, the CFTC seeks civil monetary penalties and a permanent injunction against further violations of the Commodity Exchange Act and the CFTC’s Regulations, as charged.

The following CFTC Division of Enforcement staff members are responsible for this case: Susan Gradman, David Slovick, Lindsey Evans, Joseph Rosenberg, Joseph Patrick, Scott Williamson, Rosemary Hollinger and Richard Wagner.

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