Washington, D.C. – FirstRand Bank, Ltd., a financial services company headquartered in Johannesburg, South Africa, has agreed to pay $150,000 to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) for engaging in unlawful prearranged trading practices. The settlement, finalized on August 27, 2014, stems from conduct occurring between June 2009 and August 2011.
The CFTC order details how FirstRand executed noncompetitive trades involving corn and soybean futures contracts on the Chicago Board of Trade (CBOT). Investigators found that FirstRand, which has never been registered with the CFTC, collaborated with another foreign-based company to predetermine the specifics of these trades. Prior to entering the orders on the CBOT, employees of both companies held telephone conferences to agree on the contract details – including quantity, price, direction, and timing – effectively eliminating market risk and fair competition.
According to the CFTC, these prearranged trades constituted fictitious sales, violating the Commodity Exchange Act (CEA) and CFTC regulations. The company also violated a specific CFTC regulation prohibiting noncompetitive transactions. The agency determined that FirstRand’s actions undermined the integrity of the market by circumventing typical price discovery mechanisms.
In addition to the $150,000 civil monetary penalty, FirstRand is required to implement and strengthen its internal policies and procedures. These measures are intended to detect, deter, and correct any future instances of prearranged, fictitious, or noncompetitive trading. The company must also cease and desist from further violations of relevant sections of the CEA and CFTC regulations.
The CFTC acknowledged FirstRand’s cooperation during the investigation as a factor in the settlement. The agency also expressed gratitude for the assistance provided by the CME Group. The case was led by CFTC Division of Enforcement staff members Kara Mucha, Steven Kim, Kassra Goudarzi, Michael Solinsky, and Charles D. Marvine.
Source: CFTC.gov
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