Washington, D.C. – Newedge USA, LLC, a Chicago-based futures commission merchant, will pay $220,910 in penalties and disgorgement to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC), announced February 7, 2011. The firm exceeded speculative position limits and filed inaccurate reports to regulators.
The CFTC order details that Newedge surpassed the allowable limits on October 9, 2009, in the live cattle futures contract traded on the Chicago Mercantile Exchange (CME). Specifically, Newedge purchased 4,495 October 2009 live cattle futures contracts on behalf of client JBS USA, LLC, and simultaneously entered into an over-the-counter swap with JBS. This activity resulted in a long position exceeding the 450-contract speculative limit by 4,045 contracts, a direct violation of the Commodity Exchange Act.
Further investigation revealed reporting inaccuracies spanning from June 2009 to July 2010. Newedge allegedly overstated positions in omnibus accounts, falsely reported nonexistent transactions, and incorrectly categorized account positions as net instead of gross. These errors violated CFTC reporting requirements.
In addition to the $140,000 civil monetary penalty and the $80,910 disgorgement of ill-gotten gains, Newedge is mandated to establish and maintain a comprehensive program to prevent and detect future reporting violations. The CFTC acknowledged the assistance provided by the CME in the investigation.
The case was led by CFTC staff members Susan Gradman, Camille M. Arnold, Jeremy Cusimano, Judith McCorkle, Stephen J. Obie, Scott Williamson, Rosemary Hollinger and Richard Wagner.
Source: CFTC.gov
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