WASHINGTON, D.C. – Eagle Market Makers, Inc. has been slapped with a $350,000 penalty by the Commodity Futures Trading Commission (CFTC) for engaging in manipulative trading practices, the agency announced today, June 28, 2019. The Illinois-based firm was found to have executed wash sales and noncompetitive transactions on the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange, Inc. (CME) between February 2015 and February 2019.
According to the CFTC’s order, Eagle, through its traders, entered offsetting bids and offers in futures contracts – including corn, soybeans, soybean oil, soybean meal, wheat, and Eurodollars – designed to negate market risk and eliminate price competition. These transactions involved entering similar quantities of bids and offers that were intended to, and did, offset each other upon execution.
The manipulative activity centered around the pre-trading “Pre-Open” period, specifically during the “Lockdown Period” – the final 30 seconds before trading officially begins when order modifications are prohibited. When market conditions changed during the Lockdown Period, Eagle traders allegedly entered “Offsetting Orders” to cancel their original bids and offers, effectively engaging in wash sales. Immediately following the market’s opening, these offsetting orders neutralized the initial trades.
“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 CFTC Enforcement Director James McDonald. “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 civil monetary penalty, Eagle Market Makers, Inc. is required to cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations. The firm must also implement and improve its internal controls and procedures to ensure future compliance with regulations prohibiting wash sales and non-competitive trading.
The CFTC’s investigation is ongoing.
Source: CFTC.gov
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