U.S. COMMODITY FUTURES TRADING COMMISSION SANCTIONS UK AND GERMAN TRADING COMPANIES FOR ILLEGALLY PREARRANGING FUTURES TRADES THAT REPRESENTED FICTITIOUS SALES ON U.S. MARKETS
WASHINGTON, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges under the Commodity Exchange Act (CEA) that Armajaro Trading Limited (Armajaro), a UK company located in London that engages in cocoa trading operations in Ghana and the Ivory Coast, and Warenhandelsgesellschaft Corinth, m.b.H. (Corinth), a German trading company, each knowingly participated in two illegal, prearranged cocoa spread cross trades on the Coffee, Sugar & Cocoa Exchange (CSCE), a subsidiary of the New York Board of Trade.
The CFTC order finds that, on April 1 and 16, 2002, employees of Armajaro and Corinth engaged in a series of communications with one another about specific quantities and prices of the cocoa futures contracts to be bought and sold between the two companies on the CSCE. On both occasions, prior to the trades being submitted for execution on the CSCE, employees of Armajaro and/or Corinth had telephone conversations regarding the specific proposed trades with the broker who caused the orders to be entered later on those days, the order finds. The prearrangement of the buy and sell orders ensured that the orders would meet on the trading floor at the specific prices and quantities agreed upon prior to the execution of the trades, according to the order.
The CFTC found that these prearranged cross trades negated market risk and price competition, and therefore constituted both fictitious sales under the CEA and noncompetitive trades under CFTC regulations.
The order directs Armajaro and Corinth to cease and desist from further violations of the CEA; requires Armajaro to pay a civil penalty of $35,000 and Corinth to pay a civil penalty of $25,000; and obliges both trading companies to comply with specific undertakings.
In consenting to the entry of the CFTC’s order, the respondents neither admitted nor denied the findings made in the order.
The following Division of Enforcement staff were responsible for this case: Vincent B. Johnson, William Janulis, Rosemary Hollinger, Scott Williamson, and Joan Manley.
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