February 7, 2011

CFTC Orders Chicago-Based Futures Commission Merchant Newedge USA, LLC to Pay More than $220,000 for Violating Speculative Position Limits in Live Cattle Futures Trading

Washington, DC -- The U.S. Commodity Futures Trading Commission (CFTC) today announced that Newedge USA, LLC (Newedge), a Chicago-based futures commission merchant, will pay a $140,000 civil monetary penalty and disgorge $80,910 to settle CFTC charges of exceeding speculative position limits in the October 2009 live cattle futures contract on the Chicago Mercantile Exchange (CME) by more than 4,000 contracts and failing to provide accurate and timely reports to the CFTC regarding their large trader positions.

According to the CFTC order, entered on February 7, 2011, Newedge purchased 4,495 October 2009 live cattle futures contracts on the CME from its client, JBS USA, LLC (JBS), a meat packing company, and sold to JBS an over-the-counter swap in live cattle on October 9, 2009. Newedge’s purchase of 4,495 October 2009 futures contracts on October 9 gave Newedge a long position of 4,495 October futures contracts. That long position exceeded the 450 contract speculative limit for trading live cattle futures on the CME in the current delivery month by 4,045 contracts, in violation of the Commodity Exchange Act’s (CEA’s) prohibition against exceeding speculative position limits.

Additionally, the order finds that, between June 2009 and July 2010, Newedge’s large trader position reports submitted to the CFTC overstated positions in omnibus accounts, reported transactions that did not occur and reported positions for accounts as net when they should be reported as gross, among other violations.

In addition to imposing a civil monetary penalty and disgorgement, the CFTC’s order requires Newedge to implement and maintain a program designed to prevent and detect reporting violations of the CEA and CFTC regulations.

The CFTC appreciates the assistance of the CME with this action.

The CFTC Division of Enforcement staff responsible for this case are Susan Gradman, Camille M. Arnold, Jeremy Cusimano, Judith McCorkle, Stephen J. Obie, Scott Williamson, Rosemary Hollinger and Richard Wagner.

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Last Updated: February 8, 2011