Release Number 8592-22
CFTC Orders Two Chinese Companies to Pay $720,000 for Wash Trading, Position Limit Violations, and Reporting Failures
September 23, 2022
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Beijing-based COFCO Corp. and Chinatex Corp., Ltd., for wash trading, position limit violations, and reporting failures.
The order requires that COFCO and Chinatex pay a $720,000 civil monetary penalty, for which they are jointly and severally liable, and cease and desist from violating the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
The order finds that between April 22 and May 1, 2020, Chinatex traders engaged in wash trading in order to liquidate a long position in the account of an affiliated company and re-establish the position in its own account, to the ultimate benefit of its parent company, COFCO. The traders accomplished this by entering purchase orders for ICE Cotton No. 2 futures in Chinatex’s account, while at the same time entering offsetting sale orders in the account of an affiliate. The offsetting orders were for the same delivery month, and at prices that were typically within one price tick of each other. The traders structured the orders to ensure that one set of offsetting orders were filled before entering the next set. The orders were not intended to take a bona fide position in the market, but rather to liquidate and re-establish a position while minimizing risk and price competition.
The order also finds COFCO liable for speculative position limit violations while trading ICE Cotton No. 2 futures contracts. According to the order, in March 2020, various aggregated subsidiaries of COFCO held net short positions in excess of the 5,000-contract single- and all-month position limits then applicable. Similarly, in November 2021, several subsidiaries of COFCO held net short positions in excess of the 5,950-contract single-month position limit then applicable. The subsidiaries also failed to file certain required reports accurately reflecting their cash-market exposure.
Parallel Exchange Action
In a separate action, on July 20, ICE Futures U.S. settled a disciplinary action against Chinatex and an affiliate for trade practice violations, conduct detrimental to the exchange, unauthorized use of trader identification information, position limit violations, misuse of a hedge exemption, and failure to supervise.
The CFTC appreciates the assistance of ICE Futures U.S.
The Division of Enforcement staff responsible for this matter are Janet Briner, Kelly Beck, Ashley J. Burden, Matt Edelstein, Joseph Konizeski, Garrett Eason, John Buffington, Scott Williamson, and Robert Howell.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.