The Commodity Futures Trading Commission (CFTC) has imposed a $200,000 civil monetary penalty on Taishin Securities Co., Ltd., a Taiwanese financial services company, for engaging in wash sales and non-competitive transactions on the Chicago Mercantile Exchange.
CFTC Orders Taiwanese Firm Taishin Securities to Pay $200,000 for Wash Sales
The CFTC revealed that Taishin executed 50 wash trades between October and December 2022, totaling 175 contracts worth approximately $17 million.
The trades were designed to minimise market competition by offsetting purchases and sales of the same futures contract at the same price, effectively negating the risk and price competition inherent in open market transactions.
According to the CFTC, Taishin’s actions violated the Commodity Exchange Act and CFTC regulations, which prohibit wash sales and non-competitive transactions.
Engaging in the practices can distort markets, undermine investor confidence, and create unfair advantages for certain market participants.
The CFTC explained that specifically, the order found that in or around October 2022, “a Taishin trader reached internal trading limits with the first broker and decided to transfer futures positions to Taishin’s account at the second broker.”
To make the transfer, the trader is then said to have placed offsetting orders for the purchase and sale of the same delivery month of the same futures contract at the same price on the Chicago Mercantile Exchange.
The CFTC said that this was “with the intent that some or all of those orders would offset, knowing that the timing and structure of those orders would minimize market competition.”
As a result, Taishin is said to have “negated the risk or price competition incidental to an open and competitive marketplace.”
The penalty imposed on Taishin serves as a deterrent to other market participants who may be considering engaging in similar activities.
In addition to the civil monetary penalty, the CFTC’s order requires Taishin to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations.
