CFTC Enforcement Action Charges That Firms Took Advantage of Tight Physical Market

The CFTC announced that it obtained a $13 million civil monetary penalty pursuant to a consent Order issued by the U.S. District Court for the Southern District of New York. The Order was issued against several firms and two crude oil traders ("Defendants") for alleged manipulation and attempted manipulation of the New York Mercantile Exchange Light Sweet Crude Oil futures contract spreads between January 2008 to April 2008.

According to the CFTC Complaint, the Defendants took advantage of a "tight physical market" by executing a manipulative trading strategy designed to affect NYMEX crude oil futures contract spreads by "knowingly amassing" a dominant and controlling position in physical West Texas Intermediate ("WTI") crude oil and holding the position until after futures expiry with the intent to affect NYMEX oil spreads.

The Federal Court ordered the Defendants to pay a civil monetary penalty, limited one firm's physical market trading for a period of three years, and required the companies to maintain records and audio recordings for three years. The Order further required the companies to engage an independent consultant to evaluate compliance, procedures, internal control and risk management policies, and practices, and to implement any resulting recommendations.

See: Court Order; Press Release.