SOUTH AFRICAN BANK SETTLES CFTC CHARGES FOR UNLAWFUL EXECUTION OF PREARRANGED, NONCOMPETITIVE TRADES

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

August 27, 2014

CFTC Orders FirstRand Bank, Ltd. to Pay $150,000 Civil Monetary Penalty for Unlawfully Executing Prearranged, Noncompetitive Trades on the CBOT

FirstRand and another foreign-based company prearranged noncompetitive corn and soybean futures trades

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) issued an Order filing and simultaneously settling charges against financial services company FirstRand Bank, Ltd. (FirstRand), headquartered in Johannesburg, South Africa, for executing unlawful prearranged, noncompetitive trades involving corn and soybean futures contracts on the Chicago Board of Trade (CBOT), a designated contract market of the CME Group. FirstRand has never been registered with the CFTC.

The CFTC’s Order requires FirstRand to pay a $150,000 civil monetary penalty as a result of its unlawful conduct. The Order also requires FirstRand to comply with certain undertakings, including instituting, updating, and/or strengthening policies and procedures designed to detect, deter, discipline, and correct any potential prearranged, fictitious, or noncompetitive trading in violation of the Commodity Exchange Act (CEA) and CFTC Regulations. Finally, the Order requires FirstRand to cease and desist from further violations of Section 4c(a)(1) of the CEA and CFTC Regulation 1.38(a), as charged.

The CFTC order finds that on several occasions, from June 2009 to August 2011, FirstRand and another foreign-based company entered into prearranged noncompetitive trades involving CBOT corn and soybean futures contracts. Before these trades were entered on the CBOT, employees for FirstRand and the other company had telephonic conferences with each other during which they agreed upon the contract, quantity, price, direction, and timing of those trades. These prearranged trades negated market risk and price competition and constituted fictitious sales, in violation of the CEA. Further, by entering into prearranged trades for corn and soybean futures contracts, FirstRand also engaged in noncompetitive transactions in violation of a CFTC Regulation, according to the Order.

In settling this matter, the CFTC has taken into account FirstRand’s cooperation during the CFTC’s investigation.

The CFTC thanks the CME Group for its assistance.

CFTC Division of Enforcement staff members responsible for this case are Kara Mucha, Steven Kim, Kassra Goudarzi, Michael Solinsky, and Charles D. Marvine.