HOUSTON, TX – September 25, 2024 – Merrill Lynch Commodities, Inc. (MLCI) has been ordered to pay $1.5 million and implement stricter compliance measures after being charged by the Commodity Futures Trading Commission (CFTC) with exceeding federal and exchange position limits for natural gas futures contracts. The charges stem from violations that occurred in March and April of 2023.
According to the CFTC order, MLCI exceeded the limit of 2,000 NYMEX Henry Hub Natural Gas Futures equivalents in the ICE Henry LD1 Fixed Price Futures (H) contract. On multiple trading days, the company held positions ranging from over 200 to nearly 1,000 contracts above the allowable limit, without qualifying for or receiving an exemption.
The CFTC found that MLCI, a registered swap dealer, failed to establish and enforce adequate written policies and procedures to monitor for and prevent these position limit violations. Specifically, the company lacked an early warning system and comprehensive policies to alert senior management when position limits were at risk of being breached. The CFTC also determined that MLCI did not diligently supervise its employees in this regard.
“Federal and exchange position limits are important guardrails that help ensure the integrity of our markets and entities must comply,” stated Ian McGinley, Director of Enforcement at the CFTC. “Additionally, swap dealers must comply with the business conduct standards in the CEA and CFTC regulations, including diligently supervising their employees and agents and monitoring for position limit violations.”
As part of the settlement, MLCI must cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations. The company has acknowledged the facts presented in the order and is required to comply with the specific conditions and undertakings outlined within it. The CFTC acknowledged MLCI’s cooperation and remediation efforts throughout the investigation.
The CFTC extended its gratitude to ICE Futures U.S. for their assistance in the matter. The case was led by Karin N. Roth, Carrie Kennedy, Gates S. Hurand, Lenel Hickson, Jr., and Manal M. Sultan of the Division of Enforcement.
Source: CFTC.gov
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