The Commodity Futures Trading Commission (CFTC) has levied a $48 million fine against a Swiss energy trader for attempting to manipulate the market for EBOB-linked futures contracts.
The violation involved selling large volumes of EBOB gasoline at below-market prices to benefit the energy trader’s derivatives positions. The enforcement action underscores the CFTC's commitment to maintaining market integrity, even in the face of sophisticated manipulation attempts.
In March 2018, the Swiss Energy Trader engaged in a scheme to manipulate the price of EBOB (a type of gasoline used primarily in Europe) to benefit its derivatives positions.
The firm sold large quantities of physical EBOB gasoline at prices lower than the market was willing to pay. The London-based price-reporting service Argus published these sales, which constituted over 60% of the total market volume that month. By driving down the benchmark price, the Energy Trader aimed to increase the value of its short position in EBOB-linked futures, allowing the firm to profit from the decline.
The CFTC determined that this constituted attempted manipulation of the market, a serious violation of the Commodity Exchange Act (CEA) and CFTC regulations.
While the Swiss Energy Trader provided some cooperation during the investigation, the firm failed to promptly produce certain WhatsApp communications, resulting in potentially relevant evidence being unavailable to the inquiry. This underscores the critical importance of complete and accurate record keeping and the ability to readily find, retrieve, and report records, especially in regulatory investigations.
The fine sends a strong message to market participants: compliance with regulatory standards is not optional. The case highlights the need for vigilance in detecting and preventing market manipulation. It is a critical reminder that regulators will detect market manipulation among the firms they regulate, regardless of its sophistication.
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