Washington, D.C. – Merrill Lynch Commodities, Inc. (MLCI) has agreed to pay a $350,000 penalty to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) for exceeding speculative position limits in Cotton No. 2 futures contracts. The settlement, announced December 7, 2011, also includes a cease and desist order preventing further violations of the Commodity Exchange Act (CEA).
According to a CFTC order, MLCI exceeded established limits on four consecutive days between January 31, 2011, and February 3, 2011, while trading on the IntercontinentalExchange U.S. (ICE). The CFTC’s speculative position limit for Cotton No. 2 futures is 5,000 contracts across all months and 3,500 contracts in any single month.
The order details that on January 31, 2011, MLCI held a net short position of 5,502 contracts, exceeding the all-month limit by 502 contracts. The following day, February 1, 2011, the company’s net short position increased to 6,059 contracts – a violation of 1,059 contracts. Additionally, MLCI held 3,727 contracts in the March 2011 contract, surpassing the single-month limit by 227 contracts.
The CFTC acknowledged the cooperation of ICE market regulation staff in the investigation. The case was led by CFTC staff members Lindsey Evans, Mary Beth Spear, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner of the Division of Enforcement, alongside Susan Donlan, Walter Spilka, David A. Kass, and Ralph der Asadourian from the Division of Market Oversight.
This settlement underscores the CFTC’s commitment to enforcing position limits and maintaining the integrity of commodity markets.
Source: CFTC.gov
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