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Dodd Frank, Mifid

$2m settlement for position limit breach, wash trades and incorrect submission in the US

The CFTC has settled with Glencore Agriculture B.V. and Glencore Ltd $2 million for breaches of position limits in ICE cotton futures contracts, executed trades which are construed as wash trades, and making incorrect submissions. The CFTC press release can be found here and the order here.

Glencore are alleged to have broken position limits on an aggregate basis between the two entities, which are deemed to have been under the same “control”, in which case aggregate limits apply. Glencore also executed pairs of Exchange for Physical (EFP) transactions opposite each other in each of the entities. Although the trades were for “bone fide hedging purposes”, since the positions are not under independent control, they breach the non wash trade rules of the ICE exchange. Positions are to be reported in this situation using “Form 304”, which one two occasions  overstated the quantities of its fixed price cotton cash positions.

In Europe, the mandatory position limits rules under MiFID II are in the process of “bedding in” (see here).

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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