In the Matter of Absa Bank, Ltd.
Commodity Futures Trading Commission
CFTC Docket No. 14-30 (2014)
- Written by Brett Stavin, JD
Facts
Absa Bank, Ltd. (Absa) (defendant), a South African company, traded commodity futures on the Chicago Board of Trade (CBOT), a designated contract market of the CME Group. From June 2009 to August 2011, Absa and FirstRand Bank (FirstRand), another South African firm, prearranged trades in corn and soybean futures on CBOT. Before each trade, Absa and FirstRand employees coordinated on the phone regarding the product, quantity, price, direction, and timing of the trade. One party initiated a countdown prior to each trade so that the orders would likely be matched against each other. The Commodity Futures Trading Commission (CFTC) (plaintiff) believed that Absa’s actions constituted a violation of § 4c(a)(1) of the Commodity Exchange Act (CEA) and CFTC regulation 1.38(a). Absa argued that its prearranged trades were executed to hedge its position related to other positions that it traded through the Johannesburg Stock Exchange’s derivatives market. In that market, corn and soybean futures were traded in South African currency, but their market values were referenced to the futures traded on CBOT. On the Johannesburg Stock Exchange, according to Absa, prearranged trading between market makers was lawful. Instead of proceeding with adversarial litigation, Absa entered into an offer of settlement with the CFTC.
Rule of Law
Issue
Holding and Reasoning (Per curiam)
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