Washington, D.C. – Scotia Capital Inc. (SCI) has been slapped with a $250,000 penalty by the U.S. Commodity Futures Trading Commission (CFTC) for manipulating trades in natural gas futures contracts, the agency announced on January 28, 2010. The charges stem from prearranged trades executed on the New York Mercantile Exchange (NYMEX) during November and December of 2006.
According to the CFTC order, SCI, an investment dealer based in Toronto, Ontario, Canada and a subsidiary of The Bank of Nova Scotia, engaged in a scheme to prearrange trades for its customers. The firm facilitated the simultaneous purchase and sale of identical quantities of NYMEX natural gas futures contracts between two customers.
Investigators found that SCI employees actively worked to minimize the price difference between these buy and sell orders, aiming for a differential of no more than half a cent. This pre-planning effectively eliminated market risk and stifled genuine price competition, constituting what the CFTC deemed “fictitious sales and non-competitive transactions.”
The CFTC order mandates that SCI cease and desist from any further violations of the Commodity Exchange Act. The agency acknowledged the assistance provided by the NYMEX in the investigation.
The case was led by CFTC Enforcement Division staff members Eliud Ramirez, Nathan B. Ploener, Manal Sultan, Lenel Hickson, and Vincent A. McGonagle.
Representatives for Scotia Capital Inc. did not immediately respond to requests for comment.
Source: CFTC.gov
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