July 19, 2011

Ecoval Dairy Trade, Inc. Ordered to Pay $1,425,000 Penalty to Settle CFTC Charges of Attempted Manipulation of Non Fat Dry Milk Futures Prices

CFTC finds that Ecoval executed various trading strategies on the Chicago Mercantile Exchange’s Globex electronic market trading platform with intent to “push” NFDM futures contract prices higher.

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today filed and simultaneously settled charges that Ecoval Dairy Trade, Inc. (Ecoval), of Wayne, Pa., attempted to manipulate the daily settlement prices of Non Fat Dry Milk (NFDM) cash-settled futures contracts on the Chicago Mercantile Exchange (CME).

The CFTC order requires Ecoval to pay a $1,425,000 civil monetary penalty. The order also requires Ecoval to cease and desist from any further violations of Sections 6(c), 6(d), and 9(a)(2) of the Commodity Exchange Act, 7 U.S.C. § 9, 13(b) and 13(a)(2) (2006), which make it unlawful for any person to attempt to manipulate the market of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, including any contract market.

Specifically the CFTC order finds that, from September 21, 2007 through October 17, 2007 (the relevant period), Ecoval attempted to manipulate the daily settlement prices of the December 2007 through July 2008 monthly NFDM futures contracts. Ecoval executed various trading strategies on the electronic market trading platform, Globex, with the intent to “push” the prices of these NFDM futures contracts higher so Ecoval could potentially establish a large short position in these NFDM futures contracts at higher prices, the order finds. In one email quoted in the CFTC order, Ecoval’s strategy in the futures market was explained as, “[s]till selling short NFDM but at higher prices, we’re trying to push the market higher in order to obtain a better sales price for 2008.”

The CFTC order finds that during the relevant period, the NFDM futures market was illiquid and thinly traded carrying an average total open interest across 24 contract months of approximately 100 to 150 contracts. Further, market conditions at the time reflected a disparity between near month NFDM futures prices and cash prices, according to the order.

The CFTC thanks the CME Group for its assistance in this matter.

CFTC staff members responsible for this case are Kenneth McCracken, John Einstman, Elizabeth Davis, Jennifer Best, Michael Loconte, Jessica Harris, Jeremy Cusimano, Russ Battaglia, Arkadiusz Nowak, James Moser, Rick Glaser and Richard Wagner.

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Last Updated: July 19, 2011