The Commodity Futures Trading Commission (CFTC) in the US has issued an order filing and simultaneously settling charges against Singapore-based Olam International Ltd, which operates futures trading desk in London, UK and its subsidiary, Olam Americas Inc, which is based in Summit, New Jersey and also operates a futures trading. Both companies purchase, sell, and trade cocoa and other agricultural products.
The order requires Olam International and Olam Americas to pay a US$3 million penalty and prohibits them from committing future violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The CFTC found that between February 2011 and January 2013 the cocoa futures positions of Olam International and Olam Americas were not independently controlled. Cocoa futures traders on both desks had access to each other’s position information and regularly discussed the cocoa markets. Olam Americas cocoa traders placed orders to buy and sell cocoa futures for Olam International’s account; and an Olam Americas’ cocoa trader supervised some of Olam International’s cocoa futures trading activity between January 2012 and May 2012.
The CFTC said the accounts should have been aggregated for purposes of complying with the applicable position limits and that, when aggregated, the cocoa futures positions of Olam International and Olam Americas exceeded the 1,000-contract spot month position limit for cocoa futures contracts traded on ICE Futures on six trading days between February 2011 and January 2013.
The CFTC also founds that Olam International and Olam Americas entered into exchange of futures for physical transactions (EFPs). EFPs are non-competitive transactions that are permitted only if conducted in compliance with exchange rules approved by the CFTC.
The CFTC also found that Olam International filed a ‘statement of reporting trader’ (Form 40) with the CFTC in 2010 and 2012, and Olam Americas filed a Form 40 with the CFTC in 2012, that failed to disclose that their cocoa futures trading accounts were not independently controlled.