By Alexandra Alper
WASHINGTON, Sept 21 (Reuters) - The Commodity Futures
Trading Commission on Friday ordered Citigroup Inc and a
subsidiary to pay a $525,000 penalty for violating position
limits, which cap the number of contracts any trader can hold in
certain commodities.
The CFTC said Citigroup, through Citigroup Global Markets
Ltd, on several occasions in December 2009 held aggregate net
long positions in wheat contracts in excess of caps.
The trading occurred on the Chicago Board of Trade, which is
owned by CME Group Inc.
Citigroup spokesman Scott Helfman said in an emailed
statement that the company is pleased to have resolved the
matter.
The penalty is just the second imposed by the CFTC for
position-limit violations this year, and comes weeks before a
new set of trading curbs kicks in on Oct. 12. Those rules, which
aim to rein in speculation and limit price spikes, were included
in the 2010 Dodd-Frank financial reform law and finalized by the
agency last October.
Financial industry groups have sued to stop the new
position-limit rules from taking effect, saying the curbs would
irreparably harm the marketplace and arguing that the CFTC
failed to sufficiently weigh the economic consequences of the
rule, as is required by law.
LONG BATTLE
Position limits have long been a part of agricultural
markets, but have remained a highly divisive issue.
Some lawmakers had pushed for the CFTC to clamp down since
early 2008, as oil and grain prices were shooting toward
historic peaks.
However, traders and some Republican lawmakers have argued
there is no evidence that speculators inflate prices. They say
curbs could make prices more volatile by removing liquidity and
sending business to overseas markets.
The CFTC's new curbs, the first of which are slated to take
effect next month, will for the first time apply to the swaps
market.
Additional curbs are likely to go into effect next year.
The Securities Industry and Financial Markets Association
(SIFMA) and the International Swaps and Derivatives Association
(ISDA) challenged the new rules in December. The court has yet
to rule in the case.
In the meantime, the CFTC is still working to enforce
current rules.
In February, the CFTC ordered New York firm D.E. Shaw & Co
to pay $140,000 for violating soybean and corn futures position
limits.
In December of last year, the agency ordered Merrill Lynch
Commodities Inc to pay $350,000 for position violations in the
cotton futures market.
(Additional reporting by Sarah N. Lynch)
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