U.S. COMMODITY FUTURES TRADING COMMISSION FINES FOREIGN FUTURES AND OPTIONS BROKER CREDIT LYONNAIS ROUSE LIMITED FOR ENTERING ILLEGAL, PREARRANGED FUTURES TRADES 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 Credit Lyonnais Rouse Limited (CLR), a U.K. futures and options broker, knowingly participated with two foreign traders 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, issued on August 24, 2005, finds that on two days in April 2002, employees of CLR engaged in a series of communications with two foreign traders pertaining to specific quantities and prices of cocoa futures contracts to be bought and sold between the two traders on the CSCE. On both occasions, according to the order, prior to the trades being submitted for execution on the CSCE, employees of CLR had telephone conversations regarding those trades with the foreign traders who submitted the trades to CLR, who subsequently caused the orders to be entered those same days. 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 constituted fictitious sales under the CEA and noncompetitive trades under CFTC regulations.
The order directs CLR to cease and desist from further violations of the CEA, pay a civil penalty of $85,000, and comply with a specified undertaking. In consenting to the entry of the CFTC’s order, CLR neither admitted nor denied the findings made in the order. This is the second such order entered against CLR by the CFTC within the past year (see CFTC News Release 5002-04, October 4, 2004).
The CFTC previously issued an order imposing civil penalties and other sanctions against the two foreign traders, Armajaro Trading Limited, a United Kingdom company, and Warenhandelgesellschaft Corinth, m.b.H., a German trading company, relating to the transactions for which CLR was sanctioned in this order (see CFTC News Release 5093-05, June 29, 2005).
The following Division of Enforcement staff were responsible for this case: Vincent B. Johnson, William Janulis, Michael Tallarico, Rosemary Hollinger, Scott Williamson, and Joan Manley.
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The CFTC encourages members of the public to bring to our attention any suspicious activities involving futures or commodity options, including matters involving foreign currency (forex) investments or suspicious internet websites.
You may contact the CFTC at 1-866-FON-CFTC (1-866-366-2382) visit us at our Customer Protection web page: (www.cftc.gov/cftc/cftccustomer.htm), or fill out our Internet Report Form identifying your concerns (www.cftc.gov/enf/enfform.htm).
In addition, the CFTC publishes a series of Consumer Advisories at http://www.cftc.gov/cftc/cftccustomer.htm#advisory alerting the public to warning signs of possible fraudulent activity and offering precautions individuals should take before committing funds.