December 7, 2011

CFTC Orders Merrill Lynch Commodities, Inc. to Pay $350,000 Civil Penalty for Violating Cotton Futures Speculative Position Limits

Washington, DC -- The U.S. Commodity Futures Trading Commission (CFTC) today announced that Merrill Lynch Commodities, Inc. (MLCI) agreed to pay a $350,000 civil monetary penalty to settle CFTC charges that it exceeded speculative position limits in Cotton No. 2 futures contracts in trading on the IntercontinentalExchange U.S. (ICE). MLCI also agreed to cease and desist from further such violations of Section 4a(b)(2) of the Commodity Exchange Act (CEA).

According to the CFTC order, MLCI held net futures equivalent positions in Cotton No. 2 futures contracts in excess of CFTC speculative position limits on ICE over four consecutive days from January 31, 2011, through February 3, 2011. These MLCI positions exceeded the CFTC’s speculative position limit of 5,000 contracts in all months and 3,500 contracts in any single month in Cotton No.2, the order finds, and violated the CEA’s prohibition against trading in excess of speculative position limits.

Specifically, at the end of the trading day on January 31, 2011, MLCI held a net short position of 5,502 contracts, which was 502 contracts over the all months speculative position limit, according to the order. The following day, on February 1, 2011, MLCI held a net short position of 6,059 contracts, which was 1,059 contracts over the all months speculative limit. MCLI also held a net short position of 3,727 contracts in the March 2011 contract, which was 227 contracts over the single month speculative position limit, the order also finds.

The CFTC appreciates the assistance of ICE market regulation staff.

CFTC staff members responsible for this case are Lindsey Evans, Mary Beth Spear, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner of the CFTC’s Division of Enforcement, and Susan Donlan, Walter Spilka, David A. Kass, and Ralph der Asadourian of the CFTC’s Division of Market Oversight.

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Last Updated: December 7, 2011