The U.S. Commodity Futures Trading Commission (CFTC) announced today that it has issued an order filing and settling charges against Shinhan Securities Co. Ltd., a global financial services company, for engaging in wash sales and non-competitive transactions on the New York Mercantile Exchange (NYMEX).
Under the settlement, Shinhan Securities will pay a $212,500 civil monetary penalty and is ordered to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
Nature of the Violations
According to the CFTC’s order, a trader at Shinhan entered near-simultaneous bids and offers for the same quantities of the same futures contract in trading accounts beneficially owned by the same entity.
These practices:
- Increased the likelihood that buy and sell orders would match.
- Resulted in trades being executed at the same or similar price levels.
- Produced offsetting transactions that effectively negated market risk or price competition.
By doing so, Shinhan undermined the integrity of the futures market, violating the prohibition on wash sales, which are transactions designed to give a misleading appearance of genuine market activity without incurring any real economic exposure.
The CFTC emphasized that such behavior distorts the transparency of prices and compromises the open, competitive nature of U.S. derivatives markets.
Enforcement and Accountability
The Division of Enforcement staff responsible for this action included Daniel Jordan, Aboagye Agyapong, Jordon Grimm, and Paul Hayeck.
In its announcement, the CFTC reiterated its commitment to protecting market integrity, noting that even relatively small-scale violations of the wash trade prohibition can erode confidence in the fairness of derivatives trading.
Broader Context
Wash sales are a longstanding concern for regulators because they create the illusion of liquidity and trading volume without reflecting genuine market demand or supply. Such trades can mislead other market participants, disrupt price discovery, and increase systemic risks.
The action against Shinhan highlights the CFTC’s ongoing surveillance efforts to identify and punish improper trading practices, particularly in energy and commodity futures markets where price integrity is critical.
Source
CFTC Press Release No. 9125-25: CFTC Sanctions Trading Firm $212,500 for Wash Sales
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