CFTC ACTION: Scotia Capital Inc.
Felix Shipkevich - January 28, 2010The CFTC issued an order filing and simultaneously settling charges against Scotia Capital Inc., for prearranging trades in the natural gas futures contract on the New York Mercantile Exchange (NYMEX) during November and December of 2006.
The CFTC order imposes a $250,000 civil monetary penalty on SCI, an investment dealer in Toronto, Ontario, Canada and a wholly owned subsidiary of The Bank of Nova Scotia. Additionally, SCI was ordered to cease and desist from future violations of the Commodity Exchange Act.
On one or more occasions in November and December 2006, SCI prearranged natural gas futures trades on the NYMEX for its customers, according to the order. The trades were part of a strategy involving the purchase and sale of the same quantity of NYMEX natural gas futures contracts by one customer and the opposite sale and purchase of the same quantity of NYMEX natural gas futures contracts by the other customer, according to the order.
Prior to the trades being entered on the NYMEX, SCI employees arranged for the trades to be executed with a minimal price difference between long and short positions by seeking trades such that there was no more than a half a cent price differential between the buy and sell orders. These prearranged trades negated market risk and price competition and constituted fictitious sales and non competitive transactions, according to the order.
From the NFA:
January 22, Chicago
An investigation was prompted by a complaint from a customer in Russia, who described herself as a shareholder of DIP and was concerned about her investment because of her inability to communicate with Glytenko. This individual also indicated that Glytenko operated several pools which were not listed with NFA. As of May 2009, the firm had indicated to NFA that it was not currently doing futures business, but NFA's investigation of the DIP's websites suggests otherwise. Effective immediately, Glytenko, DIP and ICM are prohibited from soliciting or accepting any funds and disbursing or transferring funds of customers, pool participants or investors in any pools or accounts which Glytenko and the firms exercise control over or operate. Additionally, Glytenko, DIP and ICM are prohibited from placing trades on behalf of any pools or accounts that they exercise control over or operate. The MRA will remain in effect until Glytenko, DIP and ICM have demonstrated that they are in complete compliance with all NFA Requirements. Glytenko, DIP and ICM may request a prompt hearing before NFA's Hearing Committee.