CFTC v. Moncada

Eric Moncada (defendant) traded commodity futures in accounts known as the Serdika account and the BES account. On four occasions in October 2009, Moncada traded December 2009 wheat futures using offsetting orders in the Serdika and BES accounts, intending to match the orders against each other. On October 6, Moncada placed a buy order in the Serdika account for 80 lots at 466 cents, then 1.5 seconds later placed an offsetting sell order in the BES account for the same quantity and price. On October 12, Moncada placed a sell order in the BES account for 116 lots at 483.5 cents, with an offsetting buy order in the Serdika account 1.6 seconds later. On October 15, Moncada placed a buy order in the BES account for 271 lots at 499 cents, with a matching sell order in the Serdika account 0.7 seconds later. For the orders on each of these three dates, most, but not all, of the lots were filled by the offsetting order. The remainder was filled by other market participants. However, Moncada testified that he intended for the orders to be matched against each other. Finally, on October 29, Moncada placed a sell order in the Serdika account for 154 lots at 508 cents. Then, 17.3 seconds later, Moncada placed a buy order in the BES account for the same quantity but at a price one tick higher, at 508.25 cents. The sell order in the Serdika account was the best-offer price, and therefore, the entirety of the BES order was filled by the Serdika order, even though the BES order was slightly higher. Again, Moncada admitted that the orders were intended to be matched against each other. The Commodity Futures Trading Commission (CFTC) (plaintiff) filed an action against Moncada for making fictitious sales, also known as wash sales, in violation of § 4c(a) of the Commodity Exchange Act (CEA) and CFTC regulation 1.38. The CFTC moved for summary judgment. In response, Moncada argued that the trades were not fictitious because they were intended to close out each party’s respective positions and because some of the lots were filled by other market participants.