Chicago, IL – Eagle Market Makers, Inc., an Illinois-based firm, has been ordered to pay $350,000 in penalties by the Commodity Futures Trading Commission (CFTC) for engaging in unlawful wash sales and noncompetitive trading practices. The CFTC issued its order on June 28, 2019, simultaneously settling charges against the company.
The investigation, spanning from February 2015 to February 2019, revealed that Eagle traders executed offsetting bids and offers in futures contracts – including corn, soybeans, soybean oil, soybean meal, wheat, and Eurodollars – on the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME). These transactions were designed to negate market risk and price competition, effectively constituting wash sales.
According to the CFTC’s order, Eagle traders entered bids and offers during the pre-trading “Pre-Open” period. When market conditions changed during the final 30 seconds of the Pre-Open – known as the “Lockdown Period” where order modifications are prohibited – the company entered “Offsetting Orders” to cancel out their initial positions. These offsetting trades immediately neutralized the original bids and offers upon market opening.
“As today’s action shows, the CFTC will work tirelessly to ensure that the derivatives markets remain open and competitive, and are not undermined by unlawful wash sales and noncompetitive trading,” stated James McDonald, Director of Enforcement at the CFTC. “This case should stand as a reminder that the Commission will continue to closely monitor trading activity in our markets for all varieties of misconduct.”
In addition to the $350,000 penalty, Eagle Market Makers, Inc. is required to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations. The company must also implement and improve its internal controls and procedures to ensure future compliance with prohibitions against wash sales and non-competitive trading.
The CFTC’s investigation was ongoing at the time of the settlement.
Source: CFTC.gov
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