Washington, D.C. – San Diego Gas & Electric Company (SDG&E) has agreed to pay an $80,000 penalty to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) for engaging in prohibited wash sales of natural gas futures contracts. The settlement was announced on April 22, 2010.
The CFTC order details that between January 26, 2006, and February 2, 2006, SDG&E, a San Diego, California-based investor-owned utility, placed simultaneous buy and sell orders for New York Mercantile Exchange (NYMEX) natural gas futures contracts. The company instructed its introducing broker to execute these offsetting trades – buying and selling contracts for August through October 2006 delivery – on the same phone call.
According to the CFTC, SDG&E was aware the broker would request that the buy and sell orders be executed at or near the same price on the NYMEX trading floor, and that they were executed at approximately the same time. This practice effectively liquidated and immediately re-established existing futures contracts held by SDG&E.
The CFTC determined these transactions constituted illegal wash sales, a form of market manipulation. However, the order acknowledges SDG&E’s cooperation with the investigation.
In addition to the $80,000 civil monetary penalty, SDG&E has agreed to implement new procedures to ensure future transactions on U.S. futures markets comply with all applicable rules and regulations under the Commodity Exchange Act.
The case was led by CFTC Enforcement Division staff members Joseph Rosenberg, Steven Ringer, Lenel Hickson, and Vincent McGonagle.
Source: CFTC.gov
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