By Leslie Josephs
NEW YORK--The Commodity Futures Trading Commission fined banks
and trading firms on three continents a total of $2.45 million this
week for violating government-set position limits in agricultural
futures markets.
The move comes amid calls for greater scrutiny by U.S.
regulators of opaque commodities markets from both inside and
outside the industry.
More than two-thirds of the fines were for violations in the
cotton market during a period of price volatility for the fiber not
seen in the benchmark cotton contract's 142-year history. Prices of
the benchmark cotton futures contract on ICE Futures U.S. last
March soared to a record $2.27 a pound. Prices had averaged around
65 cents for the previous decade. That was followed by a sharp
sell-off that roiled the global textile industry.
J.P. Morgan Chase & Co. (JPM) agreed to pay $600,000 to
settle charges it exceeded speculative position limits in the
contract on several days between mid-September and early October
2010, according to the CFTC Thursday.
Shanghai investor Weidong Ge and his company, Sheenson
Investments Ltd., also agreed to give back $1 million and pay
$500,000 for holding excessive positions in the soybean oil market
in 2009 and in the cotton market in 2011, the CFTC said
Tuesday.
Australia and New Zealand Banking Group Ltd. (ANZBY, ANZ.NZ)
said it would pay $350,000 for excessive positions "on multiple
occasions" in August 2010 for wheat futures on the Chicago Board of
Trade and in cotton in February 2011, said a CFTC statement
Thursday.
The fined entities were not immediately available for
comment.
The violent price swing in cotton prices in 2010 and 2011
crushed margins at big commodity trading houses like Glencore
International Ltd (GLNCY, 0805.HK) and Olam International Ltd.
(O32.SG) and reshaped the textile industry's landscape with
cautious mills still buying small quantities of the fiber, fearful
of more price volatility.
The CFTC "wants to show that they're on it, that they're doing
something about it," said Craig Pirrong, a finance professor at the
University of Houston, who has researched commodities markets
extensively. "Part of it is a warning shot to the rest of the
industry."
Some in the commercial cotton market, however, argue that
federal regulators are not doing enough to stamp out irregularities
in the futures market.
"I think it's a combination of too little too late and not
enough," said Jordan Lea, co-owner of South Carolina cotton
merchant Eastern Trading Co.
--Alexandra Wexler contributed to this article
Write to Leslie Josephs at leslie.josephs@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires