Cargill Inc. will pay a $500,000 fine after federal commodities regulators charged its Mexican subsidiary with making banned “wash trades” on two U.S. commodity exchanges.
The U.S. Commodity Futures Trading Commission (CFTC) on Thursday issued an order that settled charges against Cargill de Mexico SA, a subsidiary of the Minnetonka agribusiness giant. Cargill is one of the largest grain traders in the world.
The CFTC found that on multiple occasions between March 2010 and August 2014, Cargill de Mexico engaged in wash sales and unlawful, noncompetitive transactions in corn, soybeans, wheat and other agriculture futures on the Chicago Board of Trade.
The CFTC said the company did the same in hard red wheat traded on the Kansas City Board of Trade.
Wash trading involves making simultaneous buy and sell orders without incurring any market risk. Specifically, the CFTC found that Cargill de Mexico employees entered equal and opposite transactions in the same futures contract.
Those orders “negated the risk incidental to an open and competitive marketplace,” allowing Cargill to engage in “noncompetitive transactions,” the CFTC said in its order.
Cargill settled the charges without admitting or denying the CFTC’s findings and “cooperated fully” with the CFTC, the agency said in its order.
In an e-mailed statement, Cargill said, “The purpose of these transactions was to transfer futures positions from one Cargill de Mexico account to another, but the futures orders traded opposite one another, and those types of transactions are prohibited by the Commodity Exchange Act and its regulations.”
The CFTC also requires Cargill de Mexico to take measures to prevent the recurrence of wash trades, including conducting training for employees addressing “ethics, compliance and legal requirements of the Commodity Exchange Act.” Cargill de Mexico must also submit a report to the CFTC showing it has adopted policies to prevent “prearranged, fictitious, or noncompetitive trading.”
Cargill said it has already complied with many of the CFTC’s requirements, including additional compliance training. “Cargill is committed to ensuring compliance with the rules and regulations of the markets wherever Cargill actively trades,” the company said in a statement.
Earlier this year, the Chicago Mercantile Exchange fined Cargill’s Mexican operation $60,000 over wash trades. The exchange, which owns the Chicago and Kansas City boards of trade, also temporarily banned two Cargill de Mexico traders for the infractions, which occurred in 2013.