HOUSTON, TX – The Commodity Futures Trading Commission (CFTC) has settled charges against Merrill Lynch Commodities, Inc. (MLCI) for exceeding federal and exchange position limits in natural gas futures contracts and for failures in swap dealer supervision and position limit monitoring. The order, issued on September 25, 2024, alleges violations occurring in March and April of 2023.
According to the CFTC, MLCI exceeded the 2,000 NYMEX Henry Hub Natural Gas Futures (NG) contract equivalent limit in the ICE Henry LD1 Fixed Price Futures (H) contract on multiple trading days. Specifically, the company’s positions ranged from over 200 to nearly 1,000 contracts beyond the allowable limits, without qualifying for or receiving an applicable exemption.
The investigation revealed that MLCI, registered with the CFTC as a swap dealer, lacked adequate written policies and procedures to monitor for and prevent position limit violations. The CFTC found the company also failed to diligently supervise its employees, lacking an early warning system and procedures to alert senior management when position limits were at risk of being breached.
MLCI has admitted to the facts outlined in the order and acknowledged its conduct violated the Commodity Exchange Act and CFTC regulations. As a result of the settlement, MLCI will pay a $1.5 million civil monetary penalty. The company is also required to cease and desist from further violations and adhere to specific conditions and undertakings outlined in the order.
“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… including diligently supervising their employees and agents and monitoring for position limit violations.”
The CFTC acknowledged MLCI’s cooperation and its remediation efforts. Assistance was also provided by ICE Futures U.S. in the investigation. The case was led by CFTC staff members Karin N. Roth, Carrie Kennedy, Gates S. Hurand, Lenel Hickson, Jr., and Manal M. Sultan.
Source: CFTC.gov
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